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Ab Ltd. Invited Applications for Issuing 75,000 Equity Shares of Rs.100 Each at a Premium of Rs.30 per Share. the Amount Way Payable as Follows: on Application and Allotment - Rs.85 per Share (Including Premium) on First and Final Call - the Balance Amoun Pass Necessary Journal Entries for the Above Transactions in the Books of Ab Ltd. - Accountancy

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AB Ltd. invited applications for issuing 75,000 equity shares of Rs.100 each at a premium of Rs.30 per share. The amount was payable as follows:

On Application and Allotment - Rs.85 per share (including premium)

On First and Final call - the balance amount

Applications for 1,27,500 shares were received. Applications for 27,500 shares were rejected and shares were allotted on pro-rata basis to the remaining applicants. Excess money received on application and allotment was adjusted towards sums due to first and final call. The calls were made. A shareholder, who applied for 1,000 shares, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were reissued at Rs.150 per share fully paid up.

Pass necessary journal entries for the above transactions in the books of AB Ltd.

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Solution

                                                                                                  Journal Entries

Date Particulars L.F. Debit (Rs.) Credit (Rs.)
 

Bank A/c            Dr.

      To Share Application and Allotment A/c

(Being share application and allotment received on 1,27,500 of Rs 85 each including Premium of Rs 30 each )

 

1,08,37,500

 

 

 

1,08,37,500

 

 

Share Application and Allotment A/c      Dr.

      To Share Capital A/c

      To Securities Premium A/c

      To Bank A/c

      To Share First and Final Call A/c

(Being share application of 75,000 shares transferred to share capital, share application and allotment on 27,500 shares refunded and rest is adjusted on share first and final call)

 

1,08,37,500

 

 

 

 

 

 

 

41,25,000

22,50,000

23,37,500

21,25,000

 

 

 

Share First and Final Call A/c     Dr.

      To Share Capital A/c

(Being share first call due on 75,000 shares of Rs 45 each)

 

33,75,000

 

 

 

33,75,000

 

 

Bank A/c        Dr.

     To Share First and Final Call A/c

(Being share first and final call received)

 

12,37,500

 

 

 

12,37,500

 

 

Share Capital A/c        Dr.

    To Share Forfeiture A/c

    To Share First and Final Call A/c

(Being 750 share, were forfeiture for non- payment of share first and final call of Rs 45 each)

 

75,000

 

 

 

 

62,500

12,500

 

 

Bank A/c           Dr.

     To Share Capital A/c

     To Securities Premium A/c

Being 750 forfeited share were re-issued at Rs 150 each fully paid up)

 

1,12,500

 

 

 

 

75,000

37,500

 

 

Share Forfeiture A/c      Dr.

    To Capital Reserve A/c

(Being share forfeiture transferred to capital reserve)

 

62,5000

 

 

62,500

 

Category Share Applied Share Allotted Money received on App. and Allot. @ Rs.85 each including premium of Rs.30 each Money transfers to share capital @ Rs.85 each including premium of Rs.30 each Money transfer to securities premium @ Rs.30 each Excess Application and Allotment money Share first and final call due @ Rs.45 each Amount receivable on share first and final call after adjustment Money Refunded
I 27,500 Nil 23,37,500           23,37,500
II 1,00,000 75,000 85,00,000 41,25,000 22,50,000 21,25,000 33,75,000 12,50,000 -
  1,27,500 75,000 7,08,37,500 41,25,000 22,50,000 21,25,000 33,75,000 12,50,000 23,37,500

 

Those who applied for 1,00,000 share allotted =75,000 share.

Those who applied for 1,000 share, alloted = 75,000 x (1000/100000) = 750 shares

Share Application and Allotment received on 1,000 shares of Rs.85 each (including premium of Rs.30 each) = Rs.85,000

Shares Allotted (750 × 85) = Rs.63,750

Excess Application and Allotment money received = Rs.21,250

Share First and Final Call due on 750 shares of Rs.45 each = Rs.33,750

Excess Application and Allotment money received = Rs.21,250

Share First and Final Call not received = Rs.12,500 (33,750 – 21,250)

Therefore, Share First and final Call received = Rs.12,37,500 (12,50,000 – 12,500)

Concept: Accounting Treatment of Forfeiture and Re-issue of Share
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