Question

X Ltd. issued a prospectus inviting applications for 50,000 Equity Shares of ₹ 10 each, payable ₹ 5 as per application (including ₹ 2 as premium), ₹ 4 as per allotment and the balance towards first and final call.
Applications were received for 65,000 shares. Application money received on 5,000 shares was refunded with letter of regret and allotments were made on pro rata basis to the applicants of 60,000 shares. Money overpaid on applications including premium was adjusted on account of sums due on allotment.
Mr Sharma to whom 700 shares were allotted failed to pay the allotment money and his shares were forfeited by the Directors on his subsequently failure to pay the call money.
All the forfeited shares were subsequently sold to Mr.Jain credited as fully paid-up for ₹ 9 per share.
You are required to set out the journal entries and the relevant entries in the Cash Book.

Answer 1

The journal entries and the relevant entries in the Cash Book are prepared below:

Explanation:

Issued Shares 50,000 of 10 each at premium of Rs. 2

Applied share 65,000

Calculation of Sharma Share

No. of shares applied

$=\frac{\text { Applicaion }}{\text { Allotment }} \times Sharma Allotted$

$=\frac{60,000}{50,000} \times 700=840 \quad shares$

Excess money on Application - Rs. 700

Calls - in - Arrears on Allotment - Rs. 2100

Share Allotment

Money received on Application - Rs. 1,47,900

Share First and Final call

Money received on First and Final Call - Rs. 1,47,900

Capital Reserve

Capital Reserve - Rs. 2100