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Question
Joy Ltd. invited applications for issuing 20,000 equity shares of Rs 10 each at par. The amount was payable as follows:
On Application − Rs 3 per share
On Allotment − Rs 4 per share
On First and find call − Balance amount
The issue was oversubscribed by three times. Applications for 20% shares were rejected and the money was refunded. Allotment was made to the remaining applicants as follows:
| Category | No. of Shares Applied | No. of Shares Allotted |
| I | 30,000 | 15,000 |
| II | 18,000 | 5,000 |
Excess money received with applications was adjusted towards sums due on allotment. Money in excess to sums due on allotment was adjusted towards sums due on first and final call and any money in excess to sums due on first and final call was refunded. Kavi, a shareholder who had applied for 600 shares, failed to pay the remaining allotment money and his shares were immediately forfeited. Kavi belonged to Category I.
Afterwards the first and final call was made. Gupta, who had applied for 400 shares, failed to pay the first and final call. Gupta also belonged to Category I.
Shares of Gupta were also forfeited after the first and final call. The forfeited shares were reissued at Rs 12 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of Joy Ltd.
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Solution
| Journal | ||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| Bank A/c ...Dr. (60,000 × 3) | 1,80,000 | - | ||
| To Share Application A/c | - | 1,80,000 | ||
| (Being Received application money on 1,50,000 shares) | ||||
| Equity Share Application A/c ...Dr. | 1,80,000 | - | ||
| To Equity Share Capital A/c | - | 60,000 | ||
| To Equity Shares Allotment A/c | - | 65,000 | ||
| To Share First and Final Call A/c | - | 15,000 | ||
| To Bank A/c | - | 40,000 | ||
| (Being Transfer of application money to Share Capital) | ||||
| Equity Share Allotment A/c ...Dr. (20,000 × 4) | 80,000 | - | ||
| To Equity Share Capital A/c | - | 80,000 | ||
| (Being Allotment due on 20,000 shares) | ||||
| Bank A/c ...Dr. | 14,700 | - | ||
| To Equity Shares Allotment A/c | - | 14,700 | ||
| (Being Allotment money received) | ||||
| Equity Share Capital A/c ...Dr (300 × 7) | 2,100 | - | ||
| To Equity Share Allotment A/c | - | 300 | ||
| To Forfeiture Shares A/c | - | 1,800 | ||
| (Being 300 shares forfeited for non-payment of allotment money) | ||||
| Equity Share First and Final Call A/c ...Dr. | 59,100 | - | ||
| To Equity Share Capital A/c | - | 59,100 | ||
| (Being Call money due on 19,700 shares) | ||||
| Bank A/c ...Dr. | 43,500 | - | ||
| Calls-in-Advance A/c ...Dr. | 15,000 | - | ||
| To Equity Share First and Final Call A/c | - | 58,500 | ||
| (Being Call money received) | ||||
| Equity Share Capital A/c ...Dr. | 2,000 | - | ||
| To Equity Share First and Final Call A/c | - | 600 | ||
| To Share Forfeiture A/c | - | 1,400 | ||
| (Being 200 shares forfeited for non-payment of call money) | ||||
| Bank A/c (500 × 12) ...Dr. | 6,000 | - | ||
| To Equity Share Capital A/c | - | 5,000 | ||
| To Security Premium Reserve A/c | - | 1,000 | ||
| (Being Reissue of 500 shares at Rs 12 per share) | ||||
| Share Forfeiture A/c ...Dr. | 3,200 | - | ||
| To Capital Reserve A/c | - | 3,200 | ||
| (Being Profit on re-issue transferred to Capital Reserve Account) | ||||
Notes
|
Categories |
Shares Applied
|
Shares Allotted
|
Money received on Application @ Rs. 3 each |
Money transferred to Share Capital @ Rs. 3 each |
Excess Application money |
Amount adjusted on Allotment |
Amount adjusted on First Call |
Money refunded |
|
I |
30,000 |
15,000 |
90,000 |
45,000 |
45,000 |
45,000 |
- | - |
|
II |
18,000 |
5,000 |
54,000 |
15,000 |
39,000 |
20,000 |
15,000 |
4,000 |
|
III |
12,000 |
- |
36,000 |
- | - | - |
36,000 |
|
|
|
60,000 |
20,000 |
1,80,000 |
60,000 |
84,000 |
65,000 |
15,000 |
40,000 |
Calculation of Amount Received on Allotment
| Amount Due on Allotment | 80,000 |
| Less: Excess Received | 65,000 |
| Balance to be Received | 15,000 |
| Less: Amount not paid by Kavi | (300) |
| Amount received on Allotment | 14,700 |
Calculation of Shares Applied/Allotted
Shares Allotted to Kavi = `15000/30000xx6000=300`
| Amount not paid by Kavi on Allotment | |
| Amount received on Application | 1,800 |
| Less: Actual tfd to Share Capital | (900) |
| Excess received on Application | 900 |
| Amount due on allotment | 1,200 |
| Less: Excess adjustment | (900) |
| Amount unpaid by Kavi | 300 |
Share Allotted to Gupta = `15000/3000xx400=200`
| Amount not paid by Gupta on First & Final Call | |
| Amount received on Application | 1,200 |
| Less: Actual tfd to Share Capital | (600) |
| Excess received on Application | 600 |
| Amount due on allotment | 800 |
| Less: Excess adjustment | (600) |
| Amount to be received on Allotment | 200 |
The above table shows that excess money is fully exhausted on application and allotment, which means that call money is fully unpaid i.e. Rs. 600 (200 × 3)
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