(Pro-rata Allotment of Shares Issued at Premium, Non-Payment of Allotment and Calls, Forfeiture and Reissue).
A limited company issued a prospectus inviting applications for 2,000 shares of Rs.10 each at a premium of Rs.2 per share payable as follows:
On application Rs.2 per share
On allotment Rs.5 per share (including premium)
On 1st call Rs.3 per share
On 2nd call Rs2 per share
Application were received for 3,000 shares and allotment made pro-rata to the applicants of 2,400 shares, the remaining applications being refused. Money over-paid on application was employed on account of sums due on allotment. Rajesh, to whom 40 shares were allotted failed to pay allotment money and on his subsequent failure to the 1st call, his shares were forfeited. Madan, the holder of 60 shares, failed to pay the two calls and so his shares were also forfeited.
All these shares were sold to Kadam credited as fully paid for Rs.9 per share.
Show the Journal and Cash Book entries in the books of the company.
please also show the working notes.
Journal | |||||
Date | Particulars | L.F. | Debit Amount (Rs) | Credit Amount (Rs) | |
Equity Share Application A/c | Dr. | 4,800 | |||
To Equity Share Capital A/c | 4,000 | ||||
To Equity Share Allotment | 800 | ||||
(being application transferred to Capital) | |||||
Equity Share Allotment A/c | Dr. | 10,000 | |||
To Equity Share Capital A/c | 6,000 | ||||
To Security Premium A/c | 4,000 | ||||
(being Allotment due on 2,000 shares) | |||||
Equity Share First Call A/c | Dr. | 6,000 | |||
To Equity Share Capital A/c | 6,000 | ||||
(being first call due on 2,000 shares @ Rs 3 each) | |||||
Equity Share Capital A/c | Dr | 320 | |||
Security Premium A/c | Dr | 80 | |||
To Equity Share Allotment A/c | 184 | ||||
To Equity Share First Call A/c | 120 | ||||
To Equity Share Forfeiture A/c | 96 | ||||
(being 40 shares of Rajesh forfeited for non payment of allotment and first call) | |||||
Equity Share Final Call A/c | Dr. | 3,920 | |||
To Equity Share Capital A/c | 3,920 | ||||
(being first call due on 2,000 shares @ Rs 2 each) | |||||
Equity Share Capital A/c | Dr | 600 | |||
To Equity Share First Call A/c | 180 | ||||
To Equity Share Second Call A/c | 120 | ||||
To Equity Share Forfeiture | 300 | ||||
(being 60 shares of Madan forfeited for non payment of two calls) | |||||
Equity Share Forfeiture A/c | Dr | 100 | |||
To Equity Share Capital A/c | 100 | ||||
(being 100 shares re-issued at Rs 9 per share as fully paid-up) | |||||
Equity Share Forfeiture A/c | Dr. | 296 | |||
To Capital Reserve A/c | 296 | ||||
(being profit on forfeiture transferred to Capital Reserve) | |||||
Cash Book | ||||||||
Dr. | Cr. | |||||||
Date | Particulars | L.F. | Amount (Rs) | Date | Particulars | L.F. | Amount (Rs) | |
Equity Share Application A/c | 6,000 | By Equity Share Application | 1,200 | |||||
Equity Share Allotment A/c | 9,000 | Balance c/d | 24,200 | |||||
Equity Share First Call A/c | 5,700 | |||||||
Equity Share Final Call A/c | 3,,800 | |||||||
Equity Share Capital A/c | 900 | |||||||
25,400 | 25,400 | |||||||
Working notes:
Excess amount received on application adjusted towards allotment:
Application money received on 2,400 shares= Rs 4,800 (2400 shares *2)
Application money on 2,000 allotted shares = Rs 4,000 (2,000 shares * 2)
Excess received and adjusted towards allotment = Rs 800 (Rs 4,800 - Rs 4,000)
Amount on application refunded (600*2) = Rs 1,200
Amount Received on allotment:
Due amount on allotment = 2,000 * 5 = Rs 10,000
Excess already received = Rs 800
Not received on 40 shares of Rajesh = 40*5 = Rs 200
Total amount received on allotment= Rs 10,000 - Rs 800 - Rs 200 = Rs 9,000
Amount received on first call
Due amount on first call = 2,000*3 = Rs 6,000
Not received on 100 shares (40+60) = 100*3 = Rs 300
Total amount received on first call = Rs 6,000- Rs 300 = Rs 5,700
Amount received on second call
Due amount on second call (1,960 remaining shares) = 1,960*2 = Rs 3,920
Not received on 60 shares = 60*2 = Rs 120
Total amount received on second call = Rs 3,920- Rs 120 = Rs 3,800
Calculation of share forfeiture
Rajesh-
40*24/20 = 48 shares applied
48 shares*2 = Rs 96 (only application received)
Madan-
60*24/20 = 72 shares applied
72 shares *2 = Rs 144 (application)
60 shares * 2 = Rs 120 (transferred to share capital)
Excess received = Rs 24 (Rs 144-Rs 120)
60 shares*3 = Rs 180 (due on allotment)
Less Excess received on application adjusted towards allotment = Rs 24
Amount received on allotment = Rs 180-24 = Rs 156
Total amount received on 60 shares (including application and allotment) = Rs 144 + Rs 156 = Rs 300
Total share forfeiture = Rs 396 (Rs 96+Rs 300)
Share forfeiture transferred to Capital Reserve = Rs 296 (Rs 396-Rs 100)