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Solution - Accounting Treatment of Forfeiture and Re-issue of Share

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Question

XYZ Ltd. invited applications for 40,000 equity shares of Rs.100 each at a discount of 6%. The amount was payable as follows:

On Application and Allotment - Rs.90 per share

On First and Final call - the balance amount.

Applications for 60,000 shares were received. Applications for 10,000 shares were rejected and shares were allotted on pro-rata basis to remaining applicants. Excess application money received on application and allotment was adjusted towards sums due on first and final call. The calls were made. A shareholder, who applied for 50 share, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were re-issued at Rs.97 per share fully paid up. Pass necessary journal entries for the above transactions in the books of XYZ Ltd.

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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 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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What is the maximum amount of discount at which forfeited share can be re-issued?

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KS Ltd invited application for issuing 1, 60,000 equity shares of Rs.10 each at a premium of 6 per share. The amount was payable as follows;

On Application Rs.4 per share (including premium Rs.1 per share)

On Allotment Rs.6 per share (including premium Rs.3 per share)

On First and Final Call – Balance

Application for 3, 20,000 shares were received. Applications for 80,000 share were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with application was adjusted towards surns due on allotment. Jain holding 800 shares failed to pay the allotment money his shares were forfeited immediately after allotment. Afterwards the final call was made. Gupta who has applied for 1200 shares failed to pay the final call. These shares were forfeited. Out of the forfeited shares 1000 shares were re-issued at 8 per share fully paid up. The re-issued shares included all the forfeited shares of Jain

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

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