Advertisement Remove all ads

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. - Financial Accounting(Financial Accounting and Auditing 9)

Numerical

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.

Advertisement Remove all ads

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 
Allotment A/c                 Dr.

     
  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
1,92,000 and 25 % on Rs. 48,000 respectively)

     
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)
Concept: Underwriting of Shares and Debentures Problems
  Is there an error in this question or solution?
Advertisement Remove all ads
Advertisement Remove all ads
Share
Notifications

View all notifications


      Forgot password?
View in app×