You are working as an accountant in Primrose Ltd. The company issued a prospectus
inviting applications for 60,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share
payable as Rs. 2 per share on application, Rs. 5 per share on allotment (including premium), Rs.
3 per share on first call and Rs. 2 per share on second and final call.
Applications were received for 90,000 shares and pro rata allotment was made on the
applications for 72,000 shares, rejecting the remaining applicants. Money overpaid on
applications was employed on account of sum due on allotment. Ramesh, to whom 1,200 shares
were allotted, failed to pay the allotment money and on his subsequent failure to pay the first
call, his shares were forfeited. Mohan, the holder of 1,800 shares, failed to pay the two calls, and
his shares were forfeited after the second call. Of the forfeited shares, 2,400 shares were sold to
Krishna credited as fully paid @ 9 per share, the whole of Ramesh’s shares being included. Pass
the necessary journal entries in the books of Primrose Ltd.
Your friend has recently joined Rosebud Ltd which is planning to redeem Preference Share
Capital of Rs. 15,00,000 at a premium of 10%. The company has securities premium Rs.
3,00,000; General Reserve Rs. 4,50,000. Your friend has asked your advice regarding this.
Calculate the amount of fresh issue of shares which Rosebud Ltd. is required to make as per
Section 55 of the Companies Act 2013. Also state the points which you will advise your friend to
keep in mind for redemption of preference shares to meet the legal requirements.
2. You are working in Moon Ltd. The company issued on January 1, 2016, 2,00,000, 8%
debentures of Rs. 100 each repayable at the end of 4 years at par. It was decided to create a
sinking fund for the redemption of debentures. The investments are expected to earn interest at
5% p.a. Reference to the sinking fund table shows that Re. 0.23012 invested at 5% p.a. amounts
to Re. 1 at the end of four years. On December 31, 2019, the investments were sold at Rs.
1,45,00,000 and the debentures were redeemed. Entries relating to interest and TDS on
debentures may be ignored. Prepare the 8% Debentures Account; Sinking Fund Account; and
Sinking Fund Investments Account in the books of Moon Limited for all the four years.
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