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Question
'Kalyan Limited' invited applications for issuing 90,000 equity shares of Rs 10 each at a discount of 8%. The amount was payable as follows:
On application — Rs 2 per share
On allotment — Rs 3 per share
On first and final call — The balance
Application for 87,000 shares was received. Shares were allotted to all the applicants. A shareholder, Shyam who had applied for 1,600 shares failed to pay the allotment money and his shares were immediately forfeited. Later on, the first and final call was made. Another shareholder Ram, to whom 1,500 shares were allotted failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 2,000 shares were re-issued at Rs 9 per share as fully paid-up. The re-issued shares included all the shares of Ram.
Pass necessary journal entries for the above transactions in the books of 'Kalyan Limited'
Solution
| In the books of Kalyan Ltd Journal Entry |
||||
| Date | Particulars | L.F |
Dr. Rs |
Cr. Rs |
|
Bank A/c Dr. To Equity Share Application A/c (Being amount received on an application for 87,000 shares)) |
1,74,000
|
1,74,000
|
||
|
Equity Share Application and Allotment A/c Dr. To Equity Share Capital A/c (Being amount of application transferred to Share Capital ) |
1,74,000
|
1,74,000
|
||
|
Equity Share Allotment A/c Dr. Discount on Issue of Shares A/c Dr. To Equity Share Capital A/c (Being amount due on Allotment) |
2,61,000 69,600
|
3,30,600
|
||
|
Bank A/c (2,61,000 – 4,800) Dr. To Equity Share Allotment A/c (Being amount received on share First and Final Call) |
2,56,200
|
2,56,200
|
||
|
Equity Share Capital A/c Dr. To Equity Share Forfeiture A/c To Equity Share Allotment A/c To Discount on Issue of Shares A/c (Being Shyam’s shares were forfeited) |
9,280
|
3,200 4,800 1,280
|
||
|
Equity Share First and Final Call A/c Dr. To Equity Share Capital A/c (Being amount due on first and final call after forfeiting Shyam's shares) |
3,58,680
|
3,58,680 | ||
|
Bank A/c (3,58,680 – 6,300) Dr. To Equity Share First and Final Call A/c (Being forfeited shares were reissued for Rs.9 as fully paid up) |
3,52,380
|
3,52,380
|
||
|
Equity Share Capital A/c Dr. To Equity Share Forfeiture A/c To Discount on Issue of shares A/c To Equity Share First and Final Call A/c (Being ram’s shares were forfeited) |
15,000
|
7,500 1,200 6,300
|
||
|
Bank A/c Dr. Discount on Issue of shares A/c Dr. Equity Share Forfeiture A/c Dr. To Equity Share Capital A/c (Being forfeited shares were reissued for Rs 9 as fully paid up) |
18,000 1,600 400
|
20,000
|
||
|
Equity Share Forfeiture A/c Dr. To Capital Reserve A/c (Being excess amount on forfeiture is transferred to capital reserve) |
8,100
|
8,100
|
||
Working Notes:
WN 1:
An amount payable in instalments on shares
On Application = Rs 2
On Allotment (including discount) = Rs 3 + Rs 0.80 (8% of Rs 10)
On First and Final Call = Rs 4.20 (10 – 2-3.80)
WN2:
Calculation of amount transferred to Capital Reserve
Out of the forfeited shares of Shyam, only 500 shares were reissued
The proportionate amount credited in Share Forfeiture Account on 500 shares = `3200/1600 xx 500 = 1000`
Amount debited in Share Forfeiture Account on 500 shares = `100(400/2000xx 500)`
Amount debited in share Forfeiture Account on 1500 shares = `300(400/2000) xx 1500`
Thus, amount transferred to Capital Reserve Account
On Shyam’s Shares = `Rs (1000 - 100) = 900`
On Ram’s Shares = Rs (7500 - 300) = 7200
Total = 8100
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