Question

Super Star Ltd. issued a prospectus inviting applications for 2,000 shares of ₹  10 each at a premium of ₹  2 per share , payable as:

On application	---	₹ 3 per share (including ₹  1 premium),
On allotment	---	₹  4 per share (including ₹  1 premium),
On first call	---	₹  3 per share
On second and final call	---	₹  2 per share.

Applications were received for 3,000 shares and pro rata allotment was made on the applications for 2,400 shares . It was decided to utilise excess application money towards  the amount due on allotment .
Ramesh, to whom 40 shares  were allotted , failed  to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited.
Rajesh, who applied  for 72 shares failed to pay  the two calls and on such failure, his shares were forfeited . 
Of the shares forfeited, 80 shares were sold to Krishan credited as fully paid-up for ₹  9 per share, the whole of Ramesh's shares being  included.
Give journal entries to record the above transactions ( including cash transactions). 

Answer 1

Issued capital 2,000 shares of Rs 10 each at premium of Rs 2 

Applied shares 3,000

Allotment made as:				Payable as:
Applied		Allotted		Application	Rs 3	(2 + 1)
2,400		2,000		Allotment	Rs 4	(3 + 1)
600		NIL		First Call	Rs 3
				Final Call	Rs 2
3,000		2,000			Rs 12	(10 + 2) per share

Books of Super Star Ltd.

Journal

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		9,000
	To Share Application A/c				9,000
	(Share application money received for 3,000 shares at Rs 3 per share including Re 1 premium)
	Share Application A/c	Dr.		9,000
	To Share Capital A/c				4,000
	To Securities Premium A/c				2,000
	To Share Allotment A/c				1,200
	To Bank A/c				1,800
	(Share application money of 2,000 shares transferred to Share Capital and securities premium at Rs 2, and Re 1 each respectively, Rs 1,800 adjusted on allotment and remaining Rs 1,200 refunded)
	Share Allotment A/c	Dr.		8,000
	To Share Capital A/c				6,000
	To Securities Premium A/c				2,000
	(Allotment due on 2,000 shares at Rs 4 per share including Re 1 premium)
	Bank A/c	Dr.		6,664
	To Share Allotment A/c				6,664
	(Allotment received for 1960 shares after adjustment of excess application money)
	Share First Call A/c	Dr.		6,000
	To Share Capital A/c				6,000
	(First call due on 2,000 shares of at Rs 3 per share)
	Bank A/c	Dr.		5,700
	To Share First Call A/c				5,700
	(Share First Call received for 1,900 shares)
	Share Capital A/c	Dr.		320
	Securities Premium A/c	Dr.		40
	To Share Forfeiture A/c (144 – 40)				104
	To Share Allotment A/c				136
	To Share First Call A/c				120
	(40 shares of Rs 10 each, Rs 8 called-up for non-payment of money due on allotment and first including Re 1 premium)
	Share Final Call A/c	Dr.		3,920
	To Share Capital A/c				3,920
	(Final call due on 1,960 shares at Rs 2 each)
	Bank A/c	Dr.		3,800
	To Share Final Call A/c				3,800
	(Final call received for 1,900 shares)
	Share Capital A/c	Dr.		600
	To Share Forfeiture A/c				300
	To Share First Call A/c				180
	To Share Final Call A/c				120
	(60 shares forfeited for the non-payment of first call and final call money)
	Bank A/c	Dr.		720
	Share Forfeiture A/c	Dr.		80
	To Share Capital A/c				800
	(80 shares of Rs 10 each re-issued at Rs 9 per share fully paid-up)
	Share Forfeiture A/c	Dr.		224
	To Capital Reserve A/c				224
	(Balance in Share Forfeiture Account of 80 re-issued shares transferred to Capital Reserve)

Working Notes-

Ramesh’s Shares

Number of shares applied=`2400/2000 xx 40 = 48 "shares"`

Money received on Application (48 shares × Rs 3)	=	Rs	144
Less: Application money adjusted to Share Capital (40 shares × Rs 2)	=	Rs	80
Less: Securities Premium (40 shares × Re 1)	=	Rs	40
Excess money Application	=	Rs	24

 

Allotment due (40 shares × Rs 4)	=	Rs	160
Less: Excess money on Application	=	Rs	24
Calls-in-Arrears		Rs	136

Rajesh’s Shares

Number of shares allotted = `2000 / 2400 xx 72 = 60 shares`

Share Allotment

Money due on Allotment (2,000 shares × Rs 4)	8,000
Less: Excess application money adjusted	1,200
Less: Calls-in-Arrears	136
Money received on Allotment	6,664

Share First Call

Money due on First Call (2,000 shares × Rs 3)	6,000
Less: Calls-in-Arrears on Ramesh (40 shares × 3)	120
Less: Calls-in-Arrears on Rajesh (60 shares × 3)	180
Money received on First Call	5,700

Share Final Call

Money due on Final Call (1,960 shares × Rs 2)	3920
Less: Calls in Arrest on Rajesh (60 shares × Rs 2)	120
Money received on Final Call	3,800

Capital Reserve

Ramesh 

Money received from Ramesh		144
Less: Securities Premium (40 shares × Re 1)		40
Share Forfeiture	Cr.	104
Share forfeiture 40 × Rs 1	Dr.	40
Capital Reserve of Ramesh		64

Rajesh 

Share Forfeiture	Cr.	Rs	5 per share
Share Forfeiture	Dr.	Rs	1 per share
Share Forfeiture after re-issue		Rs	4 per share

Capital Reserve on Rajesh’s shares = Share Forfeiture after re-issue (per share) × No. of shares re-issued

= Rs 4 × 40

= Rs 160

Total Capital Reserve = Capital Reserve of 40 shares of Ramesh + Capital Reserve of 40

shares of Rajesh

= 64 + 160

= Rs 224