Question

Suzuki Limited issued a prospectus inviting applications for 60,000 shares of ₹10 each at a premium of 30% payable as follows: On Application ₹3.50; On Allotment ₹5.50 (including premium): On First Call ₹2 and on Second Call ₹2.
Applications were received for 95,000 shares and allotment was made pro-rata to applicants of 80,000 shares. Money over-paid on applications were employed on account of sums due on allotment.
X, to whom 1,500 shares were allotted failed to pay the allotment money and on his subsequent failure to pay the First Call his shares were forfeited. Y, the holder of 2,400 shares failed to pay the two calls and his shares were forfeited after the Second Call. Of the shares forfeited, 3,000 shares were sold to Z as fully paid, Z paying ₹8.50 per share, the whole of Y's share being included.
Give journal entries, prepare Bank Account and Balance Sheet.

Answer 1

Bank Account
Date	Particulars	Amt. (₹)	Date	Particulars	Amt. (₹)
	To Equity Share Application A/c	3,32,500		By Equity Share Application A/c	52,500
	To Equity Share Allotment A/c	2,53,500		By balance c/d	7,83,400
	To Equity Share First call A/c	1,12,200
	To Equity Share Second & Final call A/c	1,12,200
	To Equity Share Capital A/c	25,500

 

Journal entries In the books of Suzuki Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Equity Share Application A/c     ...Dr.		2,80,000
	To Equity Share capital A/c (60000 × 4)			2,10,000
	To Equity Share allotment A/c			70,000
	(application money transferred to share capital account)
2.	Equity Share Allotment A/c     ...Dr.		3,30,000
	To Equity Share capital A/c (60,000 × 2.50)			1,50,000
	To Securities Premium A/c (60,000 × 3)			1,80,000
	(allotment money due)
3.	Equity Share First call A/c     ...Dr.		1,20,000
	To Equity Share capital A/c (60000 × 2)			1,20,000
	(First call due)
4.	Equity Share Capital A/c (1500 shares @ ₹8)     ...Dr.		12,000
	Securities Premium A/c (1500 x 3)     ...Dr.		4,500
	To Equity Share Allotment A/c			6,500
	To Equity Share First call A/c (1500 × 2)			3,000
	To Forfeited Share A/c (2000 × 3.50)			7,000
	(1500 shares forfeited)
5.	Equity Share Second & Final call A/c     ...Dr.		1,17,000
	To Equity Share capital A/c (58500 × 2)			1,17,000
	(Final call due)
6.	Equity Share Capital A/c (2400 shares @ ₹10)     ...Dr.		24,000
	To Equity Share First call A/c (2400 × 2)			4,800
	To Equity Share Second & Final call A/c (2400 × 2)			4,800
	To Forfeited Share A/c (2400 × 6)			14,400
	(2400 shares forfeited)
7.	Forfeited Share A/c     ...Dr.		12,700
	To Capital Reserve A/c			12,700
	(gain on 3000 shares transferred to capital reserve)

Working note:

1) Equity share application A/c     ...Dr.     52,500
               To Bank A/c                                           52,500
(application money returned on 15,000 applications)

2) 

Total Application money	3,32,500
Less: Rejected (15000 × 3.50)	(52,500)
	2,80,000
Less: Share issued (60,000 × 3.50)	(2,10,000)
Balance adjusted in allotment	70,000

3)

Allotment money due	3,30,000
Less: received in advance	(70,000)
	2,60,000
Less: not received on 1500 shares	(6,500)
	2,53,500

4) 

Applications	Allotted
80,000	60,000
?	1,500

= `80000/60000 xx 1500 = 2000` share applications

Application money received on 2000 applications = 2000 × 3.50	7,000
Shares allotted = 1500 × 3.50	(5,250)
Excess adjusted in allotment	1,750

Allotment money due on 1500 shares = 1500 × 5.50 = 8250

Balance not paid (8250 − 1750)

5) 

First call money due	1,20,000
Less: not received on 1500 shares	3,000
Less: not received on 2400 shares	(4,800)
Balance received	1,12,200

6) 

First call money due	1,17,000
Less: not received on 2400 shares	(4,800)
Balance received	1,12,200

7) 

Forfeited amount
on 2400 shares	14,400
on 600 shares `7000/1500 xx 600`	(2,800)
Total forfeited amount	17,200
Less: loss on reissue	4,500
	12,700