Question

Tiny Toys Ltd. issued ₹ 10,00,000 shares of ₹ 100 each at a premium of ₹ 20 for subscription payable as:

₹ 10 per share on application,

₹ 40 per share and 10 premium on allotment, and

₹ 50 per share and ₹ 10 premium on final payment

Issue was oversubscribed receiving applications for 13,000 shares. Applicants for 11,000 shares were allotted 10,000 shares and applicants for 2,000 shares were sent letters of regret. All the money due on allotment and final call was duly received. Pass necessary entries in the company's books to record the above transactions. Also, show share capital in the company's Balance Sheet on completion of the above transactions.

Answer 1

Number of shares issued: 10,000 shares of ₹ 100 each

Premium: ₹ 20 per share

Amount payable per share:

Application: ₹ 10

Allotment: ₹ 40 + ₹ 10 premium = ₹ 50

Final Payment: ₹ 50 + ₹ 10 premium = ₹ 60

Applications received = 13,000 shares

Applications rejected = 2,000 shares

Applications considered for pro rata allotment:

13,000 − 2,000 = 11,000 shares

10,000 shares were allotted against applications for 11,000 shares.

Application money received:

13,000 × ₹ 10 = ₹ 1,30,000

Refund on rejected applications:

2,000 × ₹ 10 = ₹ 20,000

Excess application money adjusted towards allotment:

(11,000 − 10,000) × ₹ 10 = ₹ 10,000

Journal Entries in the Books of Tiny Toys Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		1,30,000
	To Shares Application A/c			1,30,000
	(Application money received on 13,000 shares @ ₹ 10 per share)
2.	Shares Application A/c   ...Dr.		1,30,000
	To Share Capital A/c			1,00,000
	To Shares Allotment A/c			10,000
	To Bank A/c			20,000
	(Application money transferred, excess adjusted towards allotment and money on rejected applications refunded)
3.	Shares Allotment A/c   ...Dr.		5,00,000
	To Share Capital A/c			4,00,000
	To Securities Premium A/c			1,00,000
	(Allotment money due on 10,000 shares @ ₹ 50 per share, including premium ₹ 10)
4.	Bank A/c Dr.		4,90,000
	To Shares Allotment A/c			4,90,000
	(Allotment money received after adjustment of excess application money)
5.	Shares Final Payment A/c   ...Dr.		6,00,000
	To Share Capital A/c			5,00,000
	To Securities Premium A/c			1,00,000
	(Final payment due @ ₹ 60 per share, including premium ₹ 10)
6.	Bank A/c   ...Dr.		6,00,000
	To Shares Final Payment A/c			6,00,000
	(Final payment received)

 

Balance Sheet
Particulars	Note No.	₹
EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital	1	10,00,000
Reserves and Surplus: Securities Premium		2,00,000
Total		12,00,000

 

Notes to Accounts
Particulars	₹
Note 1: Share Capital
Issued, Subscribed and Fully Paid-up Capital:
10,000 Equity Shares of ₹ 100 each	10,00,000

Bank Balance:

₹ 1,30,000 − ₹ 20,000 + ₹ 4,90,000 + ₹ 6,00,000 = ₹ 12,00,000