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Question
A Ltd. forfeited 100 equity shares of Rs 10 each issued at a premium of 20% for the non-payment of final call of Rs 5 including premium. State the maximum amount of discount at which these shares can be re-issued?
Solution
A maximum amount of discount that can be allowed at the time of reissue is the amount received (or paid by) the original shareholder i.e. Rs 7. Rs 5 is called at the time of final call which includes premium amount also. Thus, it means that Rs 7 is received from the shareholder.
RELATED QUESTIONS
KS Ltd invited application for issuing 1, 60,000 equity shares of Rs.10 each at a premium of 6 per share. The amount was payable as follows;
On Application Rs.4 per share (including premium Rs.1 per share)
On Allotment Rs.6 per share (including premium Rs.3 per share)
On First and Final Call – Balance
Application for 3, 20,000 shares were received. Applications for 80,000 share were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with application was adjusted towards surns due on allotment. Jain holding 800 shares failed to pay the allotment money his shares were forfeited immediately after allotment. Afterwards the final call was made. Gupta who has applied for 1200 shares failed to pay the final call. These shares were forfeited. Out of the forfeited shares 1000 shares were re-issued at 8 per share fully paid up. The re-issued shares included all the forfeited shares of Jain
Pass necessary journal entries for the above transactions in the books of KS Ltd.
What is the maximum amount of discount at which forfeited share can be re-issued?
Alfa Ltd. invited applications for issuing 75,000 equity shares of Rs 10 each. The amount was payable as follows :
On application and allotment - Rs 4 per share
On the first call - Rs 3 per share
On second and final call - balance
Application for 1,00,000 shares was received. Shares were allotted to all the applicants on pro-rata basis and excess money received with applications was transferred towards sums due on the first call. Vibha who was allotted 750 shares failed to pay the first call. Her shares were immediately forfeited.
Afterwards, the second call was made. The amount due on the second call was also received except on 1000 shares, applied by Monika. Her shares were also forfeited. All the forfeited shares were re-issued to Mohit for Rs 9,000 as fully paid up.
Pass necessary journal entries in the books of Alfa Ltd. for the above transactions
'Amrit Dhara Ltd.' invited applications for issuing 80,000 equity shares of Rs 10 each. The amount was payable as follows:
On application and allotment - Rs 2 per share
On the first call - Rs 4 per share
On the second and final call the balance
Applications for 1,00,000 shares were received. Shares were allotted on pro-rata basis to all the
applicants. Excess money received with applications was adjusted towards sums due on the first call. Manohar who had applied for 2,000 shares failed to pay the first call and his shares were immediately forfeited. Afterwards, a second and final call was made. Mahan who was allotted 2,400 shares failed to pay the second and final call. His shares were also forfeited. All the forfeited shares were re-issued at Rs 9 per share as fully paid up.
Pass necessary Journal Entries in the books of the company for the above transactions
'X Ltd.' invited applications for issuing 10,000 equity shares of Rs 100 each at a premium of Rs 100 per share. The amount was payable as follows:
On application and allotment - Rs 100 per share (including Rs 50 premium)
On first and final call - The balance
The issue was fully subscribed. A shareholder holding 500 shares paid the full share money with an application. Another shareholder holding 200 shares failed to pay the first and final call money. His shares were forfeited. The forfeited shares were re-issued for Rs 19,000 as fully paid up.
Pass necessary journal entries for the above transactions in the books of the company
'X Ltd.' invited applications for issuing 10,000 equity shares of Rs 100 each at a premium of `100 per share. The amount was payable as follows:
On application and allotment - Rs 100 per share (including Rs 50 premium)
On first and final call - The balance
The issue was fully subscribed. A shareholder holding 500 shares paid the full share money with an application. Another shareholder holding 200 shares failed to pay the first and final call money. His shares were forfeited. The forfeited shares were re-issued for Rs 19,000 as fully paid up.
Pass necessary journal entries for the above transactions in the books of the company
Luxury Cars Ltd.' invited applications for issuing 10,000 equity shares of Rs 50 each at a premium of Rs 100 per share. The amount was payable as follows :
On application - Rs 75 per share (including Rs 50 premium)
On allotment - The balance
The issue was fully subscribed. A shareholder holding 400 shares paid his entire share money at the time of application. Another shareholder holding 300 shares did not pay the allotment money. His shares were forfeited. The forfeited shares were later on re-issued for Rs 90 per share as fully paid up.
Pass necessary journal entries for the above transaction in the books of the company.
On 1st April 2012, Blue Heaven Ltd. was formed with an authorised capital of Rs 20,00,000 divided into 2,00,000 equity shares of Rs 10 each. The company issued the prospectus inviting applications for 1,80,000 equity shares. The company received applications for 1,70,000 equity shares. During the first year, Rs 8 per share were called. Ram holding 2,000 shares and Varun holding 4,000 shares did not pay the first call of Rs 2 per share. Varun's shares were forfeited after the first call and later on, 3,000 of the forfeited share were reissued at Rs 6 per share, Rs 8 called up.
Show the following:
a. Share Capital in the Balance Sheet of the company as per revised Schedule VI Part I of the Companies Act, 1956.
b. Also, prepare 'Notes to Accounts' for the same.
JY Ltd. invited applications for issuing 70,000 equity shares of Rs 10 each at a discount of 10%. The amount was payable as follows:
On applications and allotment - Rs 4 per share
On first and final call - the balance amount
Application for 2,00,000 shares were received. Applications for 60,000 shares were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining applicants. The first and final call was made. All money was received except on 1,400 shares applied by Naresh. His shares were forfeited. The forfeited shares were re-issued at the maximum discount permissible under the law.
Pass necessary journal entries for the above transactions in the books of JY Ltd.
On 1st April 2012, Micro-tech Ltd. was formed with an authorised capital of Rs 50,00,000 divided into 5,00,000 equity shares of Rs 10 each. The company issued a prospectus inviting applications for 4,50,000 equity shares. The company received applications for 4,20,000 equity shares.
During the first year, Rs 8 per share were called. Ram holding 1,000 shares and Rajesh holding 2,000 shares did not pay the first call of Rs 2 per share. Rajesh's shares were forfeited after the first call and later on 1,500 of the forfeited share were re-issued at Rs 6 per share, Rs 8 called up. Show the following:
a. Share Capital in the Balance Sheet of the company as per revised Schedule VI Part I of the Companies Act, 1956.
b. Also, prepare 'Notes to Accounts' for the same
X Ltd., issued 50,000 shares of Rs 10 each at a premium of Rs 2 per share payable as follows:
Rs 3 on application
Rs 6 on allotment (including premium) and Rs 3 on call
Applications were received for 75,000 shares and a pro-rata allotment was made as follows:
To the applicants of 40,000 shares, 30,000 shares were issued and for the rest 20,000 shares were issued. All money due were received except the allotment and call money from Ram who had applied for 1,200 shares (out of the group of 40,000 shares). All his shares were forfeited. The forfeited shares were re-issued for Rs 7 per share fully paid up. Pass necessary Journal Entries for the above transaction.
State, whether the following statements is True or False.
Forfeited shares are reissued at par only.
Long Answer Question
Explain the term ‘Forfeiture of Shares’ and give the accounting treatment on forfeiture.
Record the journal entries for forfeiture and reissue of shares in the following cases:
(i) Basak Ltd. forfeited 20 shares of ₹ 10 each, ₹ 7 called-up on which the shareholder had paid application and allotment money of ₹ 5 per share. Out of these, 15 shares were reissued to Naresh as ₹ 7 per share paid-up for ₹ 8 per share.
(ii) Y Ltd. forfeited 90 shares of ₹ 10 each, ₹ 8 called-up issued at a premium of ₹ 2 per share to 'R' for non-payment of allotment money of ₹ 5 per share (including premium). Out of these, 80 shares were reissued to Sanjay as ₹ 8 called-up for ₹ 10 per share.
VT Ltd forfeited 200 shares of ₹ 10 each , issued at a premium of ₹ 5 per share , held by Mohan for non-payment of the final call of ₹ 3 per share . 100 out of these shares were reissued to Narendra at a discount of ₹ 4 per share . Journalise.
Pass necessary journal entries in the books of the company for the following transactions:
Vishesh Ltd. forfeited 1,000 Equity Shares of ₹ 10 each issued at a premium of ₹ 2 per share for non-payment of allotment money of ₹ 5 per share including premium. The final call of ₹ 2 per share was not yet called on these shares. Of the forfeited shares 800 shares were reissued at ₹ 12 per share as fully paid-up.
The remaining shares were reissued at ₹ 11 per share fully paid-up.
150 shares of ₹ 10 each issued at a premium of ₹ 4 per share payable with allotment were forfeited for non-payment of allotment money of ₹ 8 per share including premium. The first and final call of ₹ 4 per Pass Journal entries in the books of X Ltd. for the above.
Gaurav applied for 5,000 shares of ₹ 10 each at a premium of 2.50 per share. But he was allotted only 2,500 shares on pro rata basis . After having paid ₹ 3 per share on application, he did not pay allotment money of ₹ 4.50 per share (including premium) and on his subsequent failure to pay the first call of ₹ 2 per share, his shares were forfeited. These shares were reissued at the rate of ₹ 8 per share credited as fully paid .
Pass journal entries to record the forfeiture and reissue of shares.
Choose the appropriate alternative from the given options:
Vanya Ltd. forfeited 20,000 equity shares of ₹ 100 each for non-payment of first and final call of ₹ 40 per share. The maximum amount of discount at which these shares can be re-issued will be:
DF Ltd. invited applications for issuing 50,000 shares of ₹ 10 each at a premium of ₹ 2 per share. The amount was payable as follows:
On Application : ₹ 3 per share (including premium ₹ 1)
On Allotment : ₹ 3 per share (including premium ₹ 1)
On First call : ₹ 3 per share
On Second and Final Call: Balance amount
Application for 70,000 shares was received. Allotment was made on the following basis.
Applications for 5,000 shares – Full
Applications for 50,000 shares – 90%
Balance of the applications was rejected. ₹ 1,11,000 were received on account of allotment. The amount of allotment due from the shareholders to whom shares were allotted on pro-rata basis was fully received. A few shareholders to whom shares were allotted in full, failed to pay the allotment money. ₹ 1,20,000 were received on the first call. Directors decided to forfeit those shares on which allotment and call money were due. Half of the forfeited shares were re-issued @ ₹ 8 per share fully paid up. Final call was not made.
Pass the necessary journal entries for the above transactions in the book of DF Ltd.
EF Ltd. invited applications for issuing 80,000 equity shares of ₹ 50 each at a premium of 20%. The amount was payable as follows:
On Application: ₹ 20 per share (including premium ₹ 5)
On Allotment: ₹ 15 per share (including premium ₹ 5)
On First Call: ₹ 15 per share
On Second and Final call: Balance amount
Applications for 1,20,000 shares were received. Applications for 20,000 shares were rejected and pro-rata allotment was made to the remaining applicants.
Seema, holding 4,000 shares failed to pay the allotment money. Afterward, the first call was made. Seema paid allotment money along with the first call. Sahaj who had applied for 2,500 shares failed to pay the first call money. Sahaj's shares were forfeited and subsequently reissued to Geeta for ₹ 60 per share, ₹ 50 per share paid up. Final call was not made. Pass necessary journal entries for the above transactions in the books of EF Ltd. by opening a calls-in-arrears account.
The balance of share forfeited account after the reissue of forfeited shares is transferred to ______.
Balance of share forfeiture account is shown in the balance sheet under the item ______.
Which of the following is a free reserve?
What will be the correct sequence of events?
- Forfeiture of shares.
- Default on Calls.
- Re-issue of shares.
- Amount transferred to capital reserve.
Vishnu Ltd. forfeited 20 shares of ₹10 each, ₹8 called up, on which John had paid application and allotment money of ₹5 per share, of these, 15 shares were reissued to Parker as fully paid up for ₹6 per share. What is the balance in the share Forfeiture Account after the relevant amount has been transferred to Capital Reserve Account?
The balance of share forfeited account after the reissue of forfeited shares is transferred to ______?
If a share of ₹ 10 on which ₹ 8 has been called and ₹ 6 has been paid is forfeited, the Share Capital Account should be debited with:
If the loss on the re-issue of shares is less than the amount forfeited, the 'surplus' or profit is transferred to:
A forfeited share can ______
If 400 shares of ₹ 100 issued at a premium of ₹ 30 on which the full amount has been called and ₹ 80 (including premium) have been received are forfeited, the share forfeiture account should be credited with ______.
Based on the below information, you are required to answer the following question:
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Nidiya Limited was incorporated on 1st April 2017 with a registered office in Mumbai. The capital clause of the memorandum of Association reflected a registered capital of 8,00,000 equity shares of ₹ 10 each and 1,00,000 preference shares of ₹ 50 each. Since some large investments were required for building and machinery the company in consultation with vendors, M/s VPS Enterprises, issued 1,00,000 equity shares and 20,000 preference shares at par with them in full consideration of assets acquired. Besides this, the company issued 2,00,000 equity shares for cash at par payable as ₹ 3 on application, 2 on the allotment, 3 on the first call and 2 on the second call. Till date, the second call has not yet been made and all the shareholders have paid except Mr. Ajay who did not pay allotment and calls on his 300 shares and Mr. Vipul who did not pay the first call on his 200 shares. Shares of Mr. Ajay were then forfeited and out of the 100 shares were reissued at ₹ 12 per share. |
What amount of share forfeiture would be reflected in the balance sheet?
Radhe Ltd. forfeited 500 shares of ₹ 10 each fully called up for non-payment of final call of ₹ 3 per share. 300 of these shares were reissued at ₹ 8 per share as fully paid-up. The amount credited to Capital Reserve Account was:
An equity share of ₹10 fully called up on which ₹ 6 has been paid was forfeited for the non-payment of the balance amount. At which of the following minimum price can it be reissued?
A company forfeited 3,000 shares of ₹ 10 each, on which only ₹ 5 per share (including ₹ 1 premium) has been paid. Out of these few shares were re-issued at a discount of ₹ 1 per share were and ₹ 6,000 were transferred to Capital Reserve. How many shares were re-issued?
