Question

SK Ltd. invited applications for issuing 3,20,000 equity shares of Rs.10 each at a premium of Rs.5 per share. The amount was payable as follows:

On application Rs.3 per share (including premium Rs.1 per share)

On allotment Rs.5 per share (including premium Rs.2 per share)

On First and Final Call - Balance

Applications for 4,00,000 shares were received. Applications for 40,000 shares were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with applications was adjusted towards sums due on allotment. Jeevan holding 800 shares failed to pay the allotment money and his shares were immediately forfeited. Afterwards final call was made. Ganesh who had applied for 2,700 shares failed to pay the final call. His shares were also forfeited. Out of the forfeited shares 1,500 shares were re-issued at Rs.8 per share fully paid up. The re-issued shares included all the forfeited shares of Jeevan.

Pass necessary journal entries for the above transactions in the books of the company.

Answer 1

                                                                                                  Books of SK Ltd

                                                                                                         Journal

Date	Particulars	L.F.	Dr.(Rs.)	Cr.(Rs.)
	Bank A/c                                                                                                                                        Dr         To Equity Share Application A/c (Being amount received on application for 4,00,000)		12,00,000	12,00,000
	Equity Share Application A/c                                                                                                             Dr          To Equity Share Capital A/c          To Securities Premium A/c          To Equity Share Allotment A/c          To Bank A/c (Being amount of application transferred to Share Capital and excess money is adjusted towards allotment)		12,00,000	6,40,000 3,20,000 1,20,000 1,20,000
	Equity Share Allotment A/c                                                                                                               Dr             To Equity Share Capital A/c             To Securities Premium A/c (Being amount due on allotment)		16,00,000	9,60,000 6,40,000
	Bank A/c (Rs.16,00,000 – Rs.1,20,000 – Rs.3,700)                                                                             Dr              To Equity Share Allotment A/c (Being amount received on share allotment)   Share Capital A/c                                                                                                                            Dr Securities Premium A/c                                                                                                                    Dr                To Share Forfeiture A/c                To Share Allotment A/c (Being 800 shares of Jain are forfeited due to non – payment of allotment money)		14,76,300       4,000 1,600	14,76,300         1,900 3,700
	Equity Share First and Final A/c                                                                                                        Dr                 To Equity Share Capital A/c                 To Securities Premium A/c (Being amount due on first and final call on 3,19,200shares)		22,34,400	15,96,000 6,38,400
	Bank A/c (Rs.22,34,400 – Rs.16,800)                                                                                                Dr                To Equity Share First and Final Call A/c (Being amount received on first and final call)		22,17,600	22,17,600
	Equity Share Capital A/c                                                                                                                  Dr Securities Premium A/c                                                                                                                   Dr                  To Equity Share Forfeiture A/c                  To Equity Share First and Final Call A/c (Being shares of Gupta were forfeited)		24,000 4,800	12,000 16,800
	Bank A/c                                                                                                                                        Dr Share Forfeiture A/c                                                                                                                        Dr                 To Equity Share Capital A/c (Being forfeited shares were re-issued at Rs.8 per share fully paid up)		12,000 3,000	15,000
	Equity Share Forfeiture A/c                                                                                                               Dr               To Capital Reserve A/c (Being excess amount on forfeiture is transferred to capital reserve)		2,400	2,400

 

                                                                                              Computation Table

Categories	Applied Shares	Shares Allotted	Money Received on Application @ Rs.3 each	Money transferred to Share Capital @ Rs.2 each	Money transferred to Securities Premium @ Rs.1 each	Excess Application money	Amount Adjusted on Allotment	Money refunded
I II	40,000 3,60,000	3,20,000	1,20,000 10,80,000	6,40,000	3,20,000	1,20,000 1,20,000	1,20,000	1,20,000
	4,00,000	3,20,000	12,00,000	6,40,000	3,20,000	2,40,000	1,20,000	1,20,000

 

Calculation of amount unpaid on Allotment

`"Share Applied by Jeevan ="360000/320000xx800=900" Shares"`

 

Excess money received from Jeevan                                        = 300 (100 x 3)

Amount due on Allotment                                                        = 2,400 (800 x 3)

        Less : Excess Application Money                                      = Rs. 300

                                                                                          ___________________

Amount unpaid on Allotment                                                    = 2,100

Amount unpaid on Securities Premium                                      = 1,600 (800 x 2)

                                                                                          ___________________

Total amount unpaid on allotment                                             = Rs. 3,700

 

Calculation of amount received from Jeevan (Share Forfeiture (Cr)

Amount received on application                                                = 1,600 (800 x 2) ⇒ excluding premium

Add :Excess Application money                                                = 300

                                                                                           ____________________________________

Share Forfeiture (Cr.)                                                              = 1,900

 

Unpaid amount on First and Final Call

`"Share Allotted to Ganesh ="320000/360000xx2700=2400" Shares"`

Unpaid amount on First and Final Call = 16,800 (2,400 x 7)

 

Calculation of amount received from Ganesh (Share Forfeiture Cr.)

Amount received on application                                                  = Rs.4,800 (2,400 x 2) ⇒ excluding premium

Amount received on allotment                                                    = Rs.7,200 (2,400 x 3) ⇒ excluding premium

Total amount received                                                               = Rs.12,000

 

Calculation of Capital Reserve

(i) 800 shares of Jain are reissued

Share forfeiture (Cr.)                                          = 900

      Less :Share forfeiture (Dr.)                            = 1,600 (800 x 2)

                                                                       ___________________

Capital Reserve                                                  = 300

(ii) 700 Shares of Ganesh are reissued

Share Forfeiture (Cr.) for 700 shares                    = 3,500 [(12000/2400) x700]

        Less : Share Forfeiture (Dr.)                        = 1400 (700 x 2)

                                                                      ____________________________

Capital Reserve                                                  = 2,100

Total Amount of Capital Reserve                           = 2,400 (2,100 + 300)