ABC Ltd., invited the public to subscribe to the foliowing :
(i) 10,000 Equity Shares of Rs.100 each .at a premium of 5%, and
(ii) 2,50,000 in 14% Debe11tures of Rs.100@ 96.
60% of the Shares and the whole of the issue of Debentures were underwritten by Mis XYZ Ltd. for the conmission allowable by the Government. The applications from the public totalled 6,000 Shares and 2,000 Debentures. The underwriters fulfilled their obligations. Show the Journal Entries that would appear in the books of the Company. Underwriting commission is paid at 2.5%. Pass the necessary. Journal Entries in the books of ABC Ltd.
Solution
Journal of ABC Ltd. (Journal Entries without Narration)
| No. | Particulars | LF | Dr | Cr |
| 1. | Bank Alc Dr. | 8,22,000 | ||
| To Equity Shares Application and Allotment A/c | 6,30,000 | |||
| To 14% Debentures Application and Allotment A/c | 1,92,000 | |||
| 2. |
Equity Shares Application and |
|||
| To Equity Share Capital A/c | 6,00,000 | |||
| To Securities Premium A/c | 30,000 | |||
| 3. | 14% Debenture Application and Allotment A/c Dr. | 1,92,000 | ||
| Discount on Issue of Debentures Dr. | 8,000 | |||
| To 14% Debentures A/c | 2,00.000 | |||
| 4. | XYZ Ltd. A/c Dr. | 48,000 | ||
| To Equity Share Capital A/c | 2,40,000 | |||
| To Securities Premium A/c | 12,000 | |||
| 5. | XYZ Ltd. A/c Dr. | 48,000 | ||
| Discount on Issue of Debentures A/c Dr. | 2,000 | |||
| To 14% Debentures A/c | 50,000 | |||
| 6. | underwriting Commission A/c Dr. | 19,830 | ||
| To XYZ Ltd. A/c | 19,830 | |||
|
(2.5% on 6,30,000, 1.5 % on |
||||
| 7. | Bank A/c Dr. | 2,80,170 | ||
| To XYZ Ltd A/c | 2,80,170 |
Working Notes:
(a) Liability of XYZ Ltd. :
| Shares | Debentures |
| (60%) | (100%) |
|
Gross Liability 2,500 |
Less : Marked Applications :
| Shares | Debentures |
| 60% of 6,000 . | 100 % of 2,000 |
| = 3,600 | = 2,000 |
| Net Liability= 2,400 | Net Liability = 500 |
| (6,000 - 3,600) | (2,500 - 2,000) |
