Question

Radhika Ltd. invited applications for issuing 40,000 equity shares of ₹ 100 each at a premium of ₹ 50 per share. The amount was payable as follows:

On Application and Allotment	₹ 40 per share (including ₹ 10 premium)
On First Call	₹ 45 per share (including ₹ 5 premium)
On Second and Final Call	Balance

Applications for 39,000 shares were received. Allotment was made in full to all the applicants. Dinu, to whom 100 shares were allotted, failed to pay the first call money. His shares were immediately forfeited. The forfeited shares were reissued thereafter at ₹ 70 per share fully paid-up. The second and final call was not yet made.

Pass necessary Journal entries for the above transactions in the books of Radhika Ltd.

[Hint: Gain on Reissue = Amount forfeited - Discount on Reissue = ₹ 3,000 − ₹ 3,000 = NIL.]

Answer 1

Journal Entries in the Books of Radhika Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		15,60,000
	To Equity Shares Application and Allotment A/c			15,60,000
	(Application and allotment money received on 39,000 shares @ ₹ 40 per share)
2.	Equity Shares Application and Allotment A/c   ...Dr.		15,60,000
	To Equity Share Capital A/c			11,70,000
	To Securities Premium A/c			3,90,000
	(Application and allotment money transferred, including premium ₹ 10 per share)
3.	Equity Shares First Call A/c   ...Dr.		17,55,000
	To Equity Share Capital A/c			15,60,000
	To Securities Premium A/c			1,95,000
	(First Call due @ ₹ 45 per share, including premium ₹ 5 per share)
4.	Bank A/c   ...Dr.		17,50,500
	To Equity Shares First Call A/c			17,50,500
	(First Call received except on Dinu's 100 shares)
5.	Equity Share Capital A/c   ...Dr.		7,000
	Securities Premium A/c   ...Dr.		500
	To Equity Shares First Call A/c			4,500
	To Forfeited Shares A/c			3,000
	(100 shares of Dinu forfeited for non-payment of First Call)
6.	Bank A/c   ...Dr.		7,000
	Forfeited Shares A/c   ...Dr.		3,000
	To Equity Share Capital A/c			10,000
	(100 forfeited shares reissued at ₹ 70 per share as fully paid-up)

Working Note:

Face value per share: ₹ 100

Premium per share: ₹ 50

Amount payable:

Application and Allotment = ₹ 40, including premium ₹ 10

First Call = ₹ 45, including premium ₹ 5

Second and Final Call = Balance, not yet made

Applications received and shares allotted = 39,000 shares

1. Application and Allotment

39,000 × ₹ 40 = ₹ 15,60,000

Capital portion:

39,000 × ₹ 30 = ₹ 11,70,000

Premium portion:

39,000 × ₹ 10 = ₹ 3,90,000

2. First Call

39,000 × ₹ 45 = ₹ 17,55,000

Dinu failed to pay on 100 shares:

100 × ₹ 45 = ₹ 4,500

Amount received:

₹ 17,55,000 − ₹ 4,500 = ₹ 17,50,500

3. Forfeiture of Dinu's 100 Shares

Called-up Share Capital per share:

₹ 30 + ₹ 40 = ₹ 70

100 × ₹ 70 = ₹ 7,000

Unpaid First Call includes ₹ 40 capital + ₹ 5 premium.

Unpaid premium:

100 × ₹ 5 = ₹ 500

Amount already received towards capital:

100 × ₹ 30 = ₹ 3,000

Therefore, Forfeited Shares A/c = ₹ 3,000.

4. Reissue

100 shares were reissued at ₹70 each as fully paid-up:

100 × ₹ 70 = ₹ 7,000

Share Capital credited:

100 × ₹ 100 = ₹ 10,000

Discount on reissue:

₹ 10,000 − ₹ 7,000 = ₹ 3,000

Since the entire forfeited amount of ₹ 3,000 is used to cover the discount:

₹ 3,000 − ₹ 3,000 = Nil

Hence, Capital Reserve = Nil.