JS Ltd. invited applications for issuing 80,000 equity shares of Rs.10 each at a premium of Rs.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
Applications for 1,60,000 shares were received. Applications for 40,000 shares were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with applications was adjusted towards sums due on allotment. Raman holding 400 shares failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwards the final call was made. Veer who had applied for 1,200 shares failed to pay the final call. His shares were also forfeited. Out of the forfeited shares 500 shares were re-issued at Rs.8 per share fully paid-up. The re-issued shares included all the forfeited shares of Raman.
Pass necessary journal entries for the above transactions in the books of J.S. Ltd.
Solution
Books of JS Ltd
Journal
| Date | Particulars | L.F. | Dr.(Rs.) | Cr.(Rs.) |
|
Bank A/c Dr To Equity Share Application A/c (Being amount received on application for 1,60,000 shares)
Equity Share Application A/c Dr To Equity Share Capital A/c To Securities Premium A/c To Equity Share Allotment A/c To Bank A/c (Being amount of application transferred to Share Capital and excess money adjusted towards allotment)
Equity Share Allotment A/c Dr To Equity Share Capital A/c To Securities Premium A/c (Being amount due on allotment)
Bank A/c (Rs.4,80,000 – 1,60,000 – 1,600) Dr To Equity Share Allotment A/c (Being amount received on share allotment)
Share Capital A/c Dr Securities Premium A/c Dr To Share Forfeiture A/c To Share Allotment A/c (Being 400 shares of Jain are forfeited due to non – payment of allotment money)
Equity Share First and Final A/c Dr To Equity Share Capital A/c To Securities Premium A/c (Being amount due on first and final call on 79,600 shares)
Bank A/c (Rs.4,77,600 – 4,800) Dr To Equity Share First and Final Call A/c (Being amount received on first and final call)
Equity Share Capital A/c Dr Securities Premium A/c Dr To Equity Share Forfeiture A/c To Equity Share First and Final Call A/c (Being shares of Gupta were forfeited)
Bank A/c Dr Share Forfeiture A/c Dr To Equity Share Capital A/c (Being forfeited shares were re-issued at Rs.8 per share fully paid up)
Equity Share Forfeiture A/c Dr To Capital Reserve A/c (Being excess amount on forfeiture is transferred to capital reserve) |
6,40,000
6,40,000
4,80,000
3,18,400
2,400 1,200
4,77,600
4,72,800
8,000 1,600
4,000 1,000
1,600
|
6,40,000
2,40,000 80,000 1,60,000 1,60,000
2,40,000 2,40,000
3,18,400
2,000 1,600
3,18,400 1,59,200
4,72,800
4,800 4,800
5,000
1,600
|
Computation Table
| Categories | Applied Shares | Shares Allotted | Money Received on Application @ Rs.3 each | Money transferred to Share Capital @ Rs.2 each | Money transferred to Securities Premium @ Rs.1 each | Excess Application money | Amount Adjusted on Allotment | Money refunded |
| I | 40,000 | NIL | 1,60,000 | 1,60,000 | 1,60,000 | |||
| II | 1,20,000 | 80,000 | 4,80,000 | 2,40,000 | 80,000 | 1,60,000 | 1,60,000 | |
| 1,60,000 | 80,000 | 6,40,000 | 2,40,000 | 80,000 | 1,60,000 | 1,60,000 | 1,60,000 |
Calculation of amount unpaid on Allotment
Share Applied by Raman = (120000/80000) x 400 = 600 Shares
Excess money received from Jeevan = 800 (200 x 4)
Amount due on Allotment = 1,200 (400 x 3)
Less : Excess Application Money = 800
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Amount unpaid on Allotment = 400
Amount unpaid on Securities Premium = 1,200 (400 x 3)
------------------
Total amount unpaid on allotment = 1,600
Calculation of amount received from Jeevan (Share Forfeiture Cr.)
Amount received on application = 1,200 (400 x 3) ⇒ excluding premium
Add :Excess Application money = 800
-----------------------------------------------------
Share Forfeiture (Cr.) = 2,000
Unpaid amount on First and Final Call
Share Allotted to Veer = (80000/120000) x 1200 = 800 Shares
Unpaid amount on First and Final Call = 4,800 (800 x 6)
Calculation of amount received from Veer (Share Forfeiture Cr.)
Amount received on application = 2,400 (800 x 3) ⇒ excluding premium
Amount received on allotment = 2,400 (800 x 3) ⇒ excluding premium
Total amount received = 4,800
Calculation of Capital Reserve
(i) 400 shares of Raman are reissued
Share forfeiture (Cr.) = 2,000
Less :Share forfeiture (Dr.) = 800 (400 x 2)
---------------------------
Capital Reserve = 1,200
(ii) 100 Shares of Veer are reissued
Share Forfeiture (Cr.) for 800 shares = 600((4800/800)x100)
Less : Share Forfeiture (Dr.) = 200 (100 x 2)
------------------------------------
Capital Reserve = 400
Total Amount of Capital Reserve = 1,600 (1,200 + 400)
