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Question
Life machine tools Limited, issued 50,000 equity shares of Rs 10 each at Rs 12 per share, payable at to Rs 5 on application (including premium), Rs 4 on allotment and the balance on the first and final call.
Applications for 70,000 shares had been received. Of the cash received, Rs 40,000 was returned and Rs 60,000 was applied to the amount due on allotment, the balance of which was paid. All shareholders paid the call due, with the exception of one share holder of 500 shares. These shares were forfeited and reissued as fully paid at Rs 8 per share. Journalise the transactions.
Solution
Books of Life machine tools Limited
|
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|||
|
|
Bank A/c |
Dr. |
|
3,50,000 |
|
||
|
|
|
To Share Application A/c |
|
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3,50,000 |
||
|
|
(Application money received on application for 70,000 shares @ Rs 5 per share including premium Rs 2) |
|
|
|
|||
|
|
Share Application A/c |
Dr. |
|
3,50,000 |
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||
|
|
|
To Share Capital A/c |
|
|
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1,50,000 |
|
|
|
|
To Securities Premium A/c |
|
|
|
1,00,000 |
|
|
|
|
To Share Allotment A/c |
|
|
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60,000 |
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|
|
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To Bank A/c |
|
|
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40,000 |
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(Share Application money for 50,000 shares transferred to Share Capital Account and Securities Premium, Rs 60,000 adjusted to Allotment and Rs 40,000 returned) |
|
|
|
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Share Allotment A/c |
Dr. |
|
2,00,000 |
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||
|
|
|
To Share Capital A/c |
|
|
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2,00,000 |
|
|
|
(Share Allotment money due on 50,000 shares @ Rs 4 per share) |
|
|
|
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|
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Bank A/c |
Dr. |
|
1,40,000 |
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||
|
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To Share Allotment A/c |
|
|
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1,40,000 |
|
|
|
(Share Allotment money received on share allotment) |
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|
|
|
||
|
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Share First and Final A/c |
Dr. |
|
1,50,000 |
|
||
|
|
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To Share Capital A/c |
|
|
|
1,50,000 |
|
|
|
(Share First and Final Call money due on 50,000 shares @ Rs 3 per share) |
|
|
|
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|
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Bank A/c |
Dr. |
|
1,48,500 |
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||
|
|
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To Share First and Final A/c |
|
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1,48,500 |
||
|
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(Share First and Final Call money received from 49,500 shares @ Rs 3 per share and 500 shares failed to pay) |
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Share Capital A/c (500×10) |
Dr. |
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5,000 |
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||
|
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To Share First and Final Call A/c (500×3) |
|
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1,500 |
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|
|
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To Share Forfeiture A/c (500×7) |
|
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3,500 |
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(500 shares @ Rs per share fully paid up forfeited for the non- payment of Share First and Final Call Rs 3 per share) |
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|
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Bank A/c |
Dr. |
|
4,000 |
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||
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Share Forfeiture A/c |
Dr. |
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1,000 |
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To Share Capital A/c |
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5,000 |
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(500 Shares reissued @ 8 per share fully paid up) |
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Share Forfeiture A/c |
Dr. |
|
2,500 |
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||
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To Capital Reserve A/c |
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2,500 |
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(Balance of 500 shares in Forfeiture Account after adjustment, transferred to Capital Reserve Account) |
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APPEARS IN
RELATED QUESTIONS
State the preliminary steps in the issue of shares
The Orient Company Limited offered for public subscription 20,000 equity shares of Rs 10 each at a premium of 10% payable at Rs 2 on application; Rs 4 on allotment including premium; Rs 3 on First Call and Rs 2 on Second and Final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the money were received except the final call on 500 shares which were forfeited. 300 of the forfeited shares were later on issued as fully paid at Rs 9 per share. Give journal entries and prepare the balance sheet.
Eastern Company Limited, having an authorised capital of ₹ 10,00,000 divided into shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:
| On Application | ₹ 3 per share; |
| On Allotment (including premium) | ₹ 5 per share; |
| On first call (due three months after allotment) and the balance as when required. | ₹ 3 per share; |
Applications were received for 60,000 shares and the directors allotted the shares as follows:
(i) Applicants for 40,000 shares received in full.
(ii) Applicants for 15,000 shares received an allotment of 8,000 shares.
(iii) Applicants for 5,000 shares received 2,000 shares on allotment, excess money being returned.
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| On 250 shares | ₹ 2 per share. |
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| On first call | ₹ 40 per share, |
| On final call | ₹ 30 per share. |
Applications were received for 900 shares which were duly allotted and the allotment money was received in full . At the time of the first call, a shareholder who held 100 shares failed to pay the first call money and his shares were forfeited. These shares were reissued @ ₹ 60 per share , ₹ 70 per share paid-up.
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Applications for 1,00,000 shares were received. Shares were allotted to all the applicants on pro rata basis and excess money received with applications was transferred towards sums due on 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 second call was also received except on 1,000 shares applied by Monika . Her shares were also forfeited. All the forefited shares were reissued to Mohit for ₹9,000 as fully paid-up.
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The amount was payable as follow:
| On Application | --- | ₹ 30 per share, |
| On Allotment | --- | ₹ 40 per share(including premium), |
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Applications were received for 80,000 shares.
All sums were duly received except the following:
Lakhan, a holder of 200 shares did not pay allotment and call money.
Paras, a holder of 400 shares did not pay call money.
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A Ltd. invited applications for issuing 1,00,000 shares of ₹ 10 each at a premium of ₹ 1 per share. The amount was payable as follows:
| On Application | – | 3 per share; |
| On Allotment | – | 3 per share (including premium); |
| On First Call | – | 3 per share; |
| On Second and Final Call | – | Balance amount. |
Applications for 1,60,000 shares were received. Allotment was made on the following basis:
| (i) | To applicants for 90,000 shares | – | 40,000 shares; |
| (ii) | To applicants for 50,000 shares | – | 40,000 shares; |
| (iii) | To applicants for 20,000 shares | – | Full shares. |
Excess money paid on application is to be adjusted against the amount due on allotment and calls.
Rishabh, a shareholder, who applied for 1,500 shares and belonged to category (ii), did not pay allotment, first and second and final call money.
Another shareholder, Sudha, who applied for 1,800 shares and belonged to category (i), did not pay the first and second and final call money.
All the shares of Rishabh and Sudha were forfeited and were subsequently reissued at ₹ 7 per share fully paid.
Pass the necessary Journal entries in the books of A Ltd. Open Calls-in-Arrears Account and Calls-in-Advance Account wherever required.
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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.
Nitro Paints Ltd. invited applications for issuing 1,60,000 equity shares of ₹ 10 each at a premium of ₹ 3 per share. The amount was payable as follows:
| On application | --- | ₹ 6 per share(including premium ₹1); |
| On allotment | --- | ₹ 3 per share(including premium ₹ 1); and |
| The balance | --- | on First and Final call. |
Applications for 1,80,000 shares were received .Applications for 10,000 shares were rejected and pro rata allotment was made to the remaining applicants.Over payment received on application was adjusted towards sums due on allotment . All calls were made and were duly received except allotment and final call from Aditya who was allotted 3,200 shares. His shares were forfeited . Half of the forfeited shares were reissued for ₹ 43,000 as fully paid-up .
Pass necessary journal entries for the above transactions in the books of Nitro Paints Ltd.
XYZ Ltd. invited applications for issuing 50,000 Equity Shares of ₹10 each . The amount was payable as:
| On application | --- | ₹ 3 per share, |
| On allotment | --- | ₹ 4 per share, |
| On first and final call | --- | ₹ 3 per share. |
Applications were received for 75,000 shares and pro rata allotment was made as:
Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis.
Applicants for 35,000 shares were allotted 30,000 shares on pro rata basis.
Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment .
Shamu, who had applied for 700 shares out of the group applying for 35,000 shares , failed to pay the first and final call . His shares were also forfeited. Out of the forfeited shares, 1,000 shares were reissued @ Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis. 8 per share as fully paid-up. The reissued shares included all the forfeited shares of Shamu.
Pass necessary Journal entries to record the above transactions.
Explain the procedure for issue of shares.
