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Question
Stem Ltd. came up with an IPO inviting the public to subscribe to its Equity shares of ₹ 10 each. The issue was over-subscribed. The company allotted 80,000 shares to all the applicants making a pro-rata allotment in the ratio of 3 : 2. The face value of the share was payable in three instalments.
Based on the information given above and the following extract of ledger accounts and Cash Book (Bank Column), answer the questions that follow:
| Cash Book (Bank Column) (extract) | |||
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Share Application A/c | 4,80,000 | By Balance c/d | ______ |
| To Share Allotment A/c | ______ | ||
| Share Capital A/c (extract) | |||
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Share Forfeiture A/c | ______ | By Share Application A/c | ______ |
| To Call-in arrears A/c | ______ | By Share Allotment A/c | 4,00,000 |
| By Share Final Call A/c | ______ | ||
| Calls-in-Arrears A/c (extract) | |||
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Share Allotment A/c | 6,000 | ||
- What are the number of shares applied for by the public?
- What is the amount payable per share with application?
- What is the amount payable per share with first and final call?
- Stem Ltd. did not receive the allotment money and call money due from the shareholder Rehan, who had applied for 3,000 shares. What is the amount received by Stem Ltd. with allotment?
- Stem Ltd. forfeited Rehan’s shares after the final call. It reissued 1,500 forfeited shares fully called up @ ₹ 13 per share
Give the journal entries passed by the company for:- Forfeiture of these shares
- Reissue of the forfeited shares
Solution
(i) Given:
Shares allotted = 80,000
Ratio of application to allotment = 3 : 2
Using the ratio:
`3/2 = x/(80,000)`
`x = 80,000 xx 3/2`
= 1,20,000 shares
(ii) Total amount received on share application = ₹ 4,80,000
Number of shares applied: 1,20,000
= `(4,80,000)/(1,20,000)`
= ₹ 4
(iii) ₹ 1
(iv) ₹ 2,34,000
(v) (a)
| Journal Entries | |||
| Particulars | L.F. | Debit (₹) | Credit(₹) |
| Share Capital A/c ...Dr. | 20,000 | - | |
| To Share Forfeiture A/c | - | 12,000 | |
| To Calls-in-Arrear A/c | - | 8,000 | |
| (Being 2,000 shares forfeited) | |||
(b)
| Journal Entries | |||
| Particulars | L.F. | Debit (₹) | Credit (₹) |
| Bank A/c ...Dr. | 19,500 | - | |
| To Share Capital A/c | - | 15,000 | |
| To Securities Premium | - | 4,500 | |
| (Being 1,500 shares reissued) | |||
| Share Forfeiture A/c ...Dr. | 9,000 | - | |
| To Capital Reserve A/c | - | 9,000 | |
| (Being net gain on reissued shares transferred to Capital Reserve) | |||
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