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Question
'Wellness Ltd.' invited applications for issuing 40,000 equity shares of Rs 10 each at a discount of 10%.
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 - the balance
Applications for 39,000 shares were received and the allotment was made to all the applicants.
The payment was received as per the following details:
On 30,000 shares - Full amount
On 6,000 shares - Rs 7 per share
On 3,000 shares - Rs 4 per share
The Directors forfeited those shares on which less than Rs 7 per share were received. The forfeited shares were re-issued at `8 per share as fully paid up.
Pass necessary Journal Entries in the books of the company for the above transactions.
Solution
| In the books of Wellness Ltd Journal Entry |
||||
| Date | Particulars | L.F. |
Dr. Rs |
Cr. Rs |
|
Bank A/c Dr. To Equity Share Application and Allotment A/c (Being amount received on an application for Rs 39,000) |
1,56,000
|
1,56,000
|
||
|
Equity Share Application and Allotment A/c Dr. To Equity Share Capital A/c (Being amount of application transferred to Share |
1,56,000
|
1,56,000
|
||
|
Equity Share First Call A/c Dr. Discount on Issue of Shares A/c To Equity Share Capital A/c (Being amount due on the first call) |
1,17,000 39,000
|
1,56,000
|
||
|
Bank A/c (1,17,000 – 9,000) Dr. To Equity Share First Call A/c (Being amount received on the first call except on 3,000 shares) |
1,08,000
|
1,08,000
|
||
|
Equity Share Second and Final Call A/c Dr. To Equity Share Capital A/c (Being amount due on second and final call) |
78,000
|
78,000
|
||
|
Bank A/c (78,000 – 18,000) Dr. To Equity Share Second and Final Call A/c (Being amount received on second and final call) |
60,000
|
60,000
|
||
|
Equity Share Capital A/c Dr. To Discount on Issue of Shares A/c To Equity Share Forfeiture A/c To Equity Share First Call A/c To Equity Share Second and Final Call A/c (Being 3,000 shares were forfeited) |
30,000
|
3,000 12,000 9,000 6,000
|
||
|
Equity Share Forfeiture A/c Dr. To Capital Reserve A/c (Being excess amount on forfeiture is transferred to |
9,000
|
9,000
|
||
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Roxy Ltd. issued Equity shares of 10 each payable as:
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Following is an extract of the Journal of Roxy Ltd.
| Journal of Roxy Ltd. (an extract) | ||||
| Date | Particulars | L. F. | Dr. (₹) | Cr. (₹) |
| 1. | Share First Call A/c ...Dr. | 28,000 | ||
| To Share Capital A/c | 28,000 | |||
| (Being first call due on ___??___ shares @ ₹ 2 each) | ||||
| 2. | Bank A/c ...Dr. | ?? | ||
| Calls in arrears A/c ...Dr. | 2,000 | |||
| To Share First Call A/c | 28,000 | |||
| (Being first call received on ___??___ shares) | ||||
| 3. | Share Capital A/c ...Dr. | ?? | ||
| To Shares Forfeited A/c | 4,000 | |||
| To Calls in Arrears A/c | ?? | |||
| (Being ___??___ shares of ₹ 10 each forfeited for non-payment of first call) | ||||
| 4. | Share Second & Final Call A/c ...Dr. | 52,000 | ||
| To Share capital A/c | 52,000 | |||
| (Being second & final call due on ___??___ shares @ ₹ 4 each) | ||||
| 5. | Bank A/c ...Dr. | ?? | ||
| Calls in Arrears A/c ...Dr. | 10,000 | |||
| To Share Second & Final Call A/c | 52,000 | |||
| (Being second call received on ___??___ shares) | ||||
| 6. | Share capital A/c ...Dr. | ?? | ||
| To Shares Forfeited A/c | ?? | |||
| To Calls in Arrears A/c | 10,000 | |||
| (Being ___??___ shares of ₹ 10 each forfeited for non payment of final call) | ||||
| 7. | Bank A/c ...Dr. | ?? | ||
| Share Forfeited A/c ...Dr. | ?? | |||
| To Share Capital A/c | ?? | |||
| (Being 1,500 forfeited shares including those on which the first call was not received reissued @ ₹ 6 per shares fully called) | ||||
| 8. | Share Forfeiture A/c (1,000 × 0) + (500 × 2) ...Dr. | ?? | ||
| To Capital Reserve A/c | ?? | |||
| (Being ___??___) | ||||
You are required to complete the journal entries by filling up the missing information represented by '??', including the number of shares and narration, if any.
Assertion: A company can reissue a forfeited share at an amount which is less than the amount not received on it.
Reason: A company can write off the net loss made on the reissue of a forfeited share from its capital reserve.
Which one of the following is correct?
