Question

Mahira Ltd. forfeited 800 shares of ₹ 10 each on which first call of ₹ 3 per share was not received. The second and final call of ₹ 2 per share was not yet called. Out of these, 400 shares were reissued as 8 paid-up for ₹ 7 per share.

Pass the necessary Journal entries.

Answer 1

Journal Entries in the Books of Mahira Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		6,400
	To Shares First Call A/c			2,400
	To Share Forfeiture A/c			4,000
	(800 shares forfeited for non-payment of First Call of ₹ 3 per share)
2.	Bank A/c   ...Dr.		2,800
	Share Forfeiture A/c   ...Dr.		400
	To Share Capital A/c			3,200
	(400 forfeited shares reissued @ ₹ 7 per share as ₹ 8 paid-up)
3.	Share Forfeiture A/c   ...Dr.		1,600
	To Capital Reserve A/c			1,600
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Face value per share: ₹ 10

First Call unpaid: ₹ 3 per share

Second and Final Call: ₹ 2 per share, not yet called

Therefore, called-up amount per share:

₹10 − ₹ 2 = ₹ 8

Amount received per share:

₹ 8 − ₹ 3 = ₹ 5

Amount credited to Share Forfeiture A/c:

800 × ₹ 5 = ₹ 4,000

Reissue of 400 Shares:

Shares were reissued as ₹ 8 paid-up for ₹ 7 per share.

Cash received:

400 × ₹ 7 = ₹ 2,800

Share Capital credited:

400 × ₹ 8 = ₹ 3,200

Discount on reissue:

₹ 3,200 − ₹ 2,800 = ₹ 400

Forfeited amount relating to 400 shares:

`4,000 xx 400/800 = 2,000`

Capital Reserve:

₹ 2,000 − ₹ 400 = ₹ 1,600