Question

Diwan Ltd. was registered with an authorised capital of ₹ 1,00,00,000, divided into 1,00,000 equity shares of ₹ 100 each. The company invited applications for issuing 50,000 shares. The amount was payable as follows:

On Application and Allotment - ₹ 30 per share
On First call - ₹ 40 per share
On Second and Final call - balance

The issue was fully subscribed. All amounts were duly received except from Nawal, a shareholder holding 700 shares, who failed to pay the second and final call. His shares were forfeited.

On the basis of the above information, answer the following questions:

(i) The Registered capital of Diwan Ltd. is:   (1)

1. ₹ 1,00,00,000
2. ₹ 1,00,000
3. ₹ 50,00,000
4. ₹ 50,000

(ii) The Issued capital of Diwan Ltd. is:   (1)

1. ₹ 1,00,00,000
2. ₹ 1,00,000
3. ₹ 50,00,000
4. ₹ 50,000

(iii) Calls in arrears of the company amounted to:   (1)

1. ₹ 21,000
2. ₹ 70,000
3. Nil
4. ₹ 49,000

(iv) ‘Share Forfeiture Account’ will appear in the ‘Notes to Accounts’ at:   (1)

1. ₹ 21,000
2. ₹ 70,000
3. Nil
4. ₹ 49,000

(v) The amount of ‘Share Capital’ presented in the Balance Sheet of Diwan Ltd. will be:   (1)

1. ₹ 49,30,000
2. ₹ 50,00,000
3. ₹ 49,79,000
4. ₹ 49,49,000

(vi) If all the forfeited shares are reissued at ₹ 30 per share, fully paid-up, the amount transferred to ‘Capital Reserve’ will be:   (1)

1. ₹ 49,000
2. ₹ 70,000
3. ₹ 21,000
4. Nil

Answer 1

(i) 1,00,00,000

(ii) Issued capital is calculated by multiplying the number of shares issued by the face value of each share.

Shares issued = 50,000

Face value per share = ₹ 100

Issued capital = 50,000 × ₹ 100

= ₹ 50,00,000

(iii) Calls in arrears represent the amount that remains unpaid by shareholders.

Nawal owned 700 shares and failed to pay the second and final call of ₹ 30 per share.

Calls in arrears = 700 shares × ₹ 30

= ₹ 21,000

(iv) The Share Forfeiture Account is credited with the amount already paid by the shareholder before forfeiture.

Amount paid by Nawal per share:

On Application and Allotment = ₹ 30

On First call = ₹ 40

Total received = ₹ 30 + ₹ 40 = ₹ 70 per share

Amount transferred to Share Forfeiture Account:

= 700 shares × ₹ 70

= ₹ 49,000

(v) Determine the Share Capital after forfeiture.

Total shares issued = 50,000

Shares forfeited = 700

Shares remaining = 50,000 − 700 = 49,300

Amount received for each fully paid share:

Total per share = ₹ 100 (face value)

Amount received for shares that were forfeited:

Application + Allotment + First call = ₹ 70 per share

Second call unpaid = ₹ 30 per share

Total sum collected from forfeited shares = 700 × ₹ 70 = ₹ 49,000

Total amount received from fully paid shares = 49,300 × ₹ 100 = ₹ 49,30,000

Total Share Capital = ₹ 49,30,000 + ₹ 49,000

= ₹ 49,79,000

(vi) Amount forfeited per share = ₹ 70 (₹ 30 application & allotment + ₹ 40 first call)

So, the total amount in the Share Forfeiture Account:

700 × 70 = 49,000

Now the shares are reissued at ₹ 30 as fully paid-up shares of ₹ 100.

Loss (discount) on reissue per share:

100 − 30 = 70

Total discount on reissue:

700 × 70 = 49,000

This entire ₹49,000 is adjusted against the Share Forfeiture Account.

So: 

49,000 − 49,000 = 0

Hence, nothing remains to transfer to the Capital Reserve.