Question

Petromax Ltd. invited applications for issuing 75,000 equity shares of ₹ 75 each at a premium of ₹ 25 per share. The amount was payable as follows:

On Application and allotment - ₹ 40 per share

On First and Final Call - Balance (including premium)

Applications for 1,50,000 shares were received. Applications for 50,000 shares were rejected and the application money was refunded.

Shares were allotted to the remaining applicants on pro rata basis. Excess application money was utilised in payment of first and final call. Rajan, to whom 1,500 shares were allotted, failed to pay the first and final call. Sajan, who had applied for 2,000 shares, also failed to pay the first and final call. Shares of both Rajan and Sajan were forfeited.

Pass the necessary Journal entries in the books of Petromax Ltd.

Answer 1

Journal Entries In the books of Petromax Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c (1,50,000 × ₹ 40)   ...Dr.		60,00,000
	To Equity Shares Application and Allotment A/c			60,00,000
	(Application money received on 1,50,000 shares)
2.	Equity Shares Application and Allotment A/c   ...Dr.		60,00,000
	To Equity Share Capital A/c (75,000 × ₹ 40)			30,00,000
	To Calls-in-Advance A/c (25,000 × ₹ 40)			10,00,000
	To Bank A/c (50,000 × ₹ 40)			20,00,000
	(Application money adjusted and surplus refunded)
3.	Equity Shares First and Final Call A/c   ...Dr.		45,00,000
	To Equity Share Capital A/c (75,000 × ₹ 35)			26,25,000
	To Securities Premium A/c (75,000 × ₹ 25)			18,75,000
	(Allotment money due)
4.	Bank A/c   ...Dr.		33,60,000
	Calls-in-Advance A/c   ...Dr.		10,00,000
	Calls-in-Arrears A/c (WN 1, 2 and 3)   ...Dr.		1,40,000
	To Equity Shares First and Final Call A/c			45,00,000
	(First and final call money received except on 3,000 equity shares)
	Or
4.	Bank A/c   ...Dr.		33,60,000
	Calls-in-Advance A/c   ...Dr.		10,00,000
	To Equity Share First and Final call A/c			43,60,000
	(First and final call money received except on 3,000 equity shares)
5.	Equity Share Capital A/c (3,000 × ₹ 75)   ...Dr.		2,25,000
	Securities Premium A/c (3,000 × ₹ 25)   ...Dr.		75,000
	To Forfeited Shares A/c			1,60,000
	To Calls-in-Arrears A/c			1,40,000
	Or
	To Equity Shares First and Final Call A/c
	(3,000 equity shares forfeited of ₹ 75 each for non-payment of call money)

Working Notes:

1. Calculation of shares allotted to Rajan and Sajan:

(i) Shares applied by Rajan:

`(1,00,000)/(75,000) xx 1,500 = 2,000` shares

So, Rajan applied for 2,000 shares.

(ii) Shares allotted to Sajan:

`(75,000)/(1,00,000) xx 2,000 = 1,500` shares

So, Sajan was allotted 1,500 shares.

(iii) Total shares allotted to Rajan and Sajan:

1,500 + 1,500 = 3,000 shares

2. First and Final Call amount not received from Rajan:

Application and Allotment money received:

2,000 × ₹ 40 = ₹ 80,000

Less: Application and Allotment money due:

1,500 × ₹ 40 = ₹ 60,000

Excess money adjusted towards Call:

₹ 80,000 − ₹ 60,000 = ₹ 20,000

First and Final Call not received:

(1,500 × ₹ 60) − ₹ 20,000 = ₹ 70,000

So, Calls-in-Arrears from Rajan = ₹ 70,000.

3. First and Final Call amount not received from Sajan:

Application and Allotment money received:

2,000 × ₹ 40 = ₹ 80,000

Less: Application and Allotment money due:

1,500 × ₹ 40 = ₹ 60,000

Excess money adjusted towards Call:

₹ 80,000 − ₹ 60,000 = ₹ 20,000

First and Final Call not received:

(1,500 × ₹ 60) − ₹ 20,000 = ₹ 70,000

So, Calls-in-Arrears from Sajan = ₹ 70,000.

Total Calls-in-Arrears:

₹ 70,000 + ₹ 70,000 = ₹ 1,40,000