Question

K.N. Ltd. invited applications for issuing 6,00,000 equity shares of ₹ 10 each at a premium of ₹ 3 per share. The amount was payable as follows:

On Application and Allotment ₹ 3 per share.

On First Call ₹ 4 per share

On Second and Final Call Balance (including premium).

Applications for 8,00,000 shares were received. Applications for 50,000 shares were rejected and the application money was refunded. The shares were allotted to the remaining applicants as follows:

Category I: Those who had applied for 4,00,000 share were allotted 3,00,000 shares on pro-rata basis.

Category II: The remaining applicants were allotted the remaining shares on pro-rata basis.

Excess application money received with applications was adjusted towards sums due on first call. Rakesh to whom 6,000 shares were allotted failed to pay the first call money. belonged to category I. His shares were forfeited. The forfeited shares were re-issued at ₹ 13 per share fully paid up. The second call was made afterwards and was duly received.

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

Answer 1

Books of K. N. Ltd. Journal Entries
Date	Particulars	L.F.	A (₹)	B (₹)
(a)	Bank A/c    ...Dr.		24,00,000	-
	To Equity Share Application and Allotment A/c		-	24,00,000
	(Being application money received for 8,00,000 shares)
(b)	Equity Share Application and Allotment A/c    ...Dr.		24,00,000	-
	To Equity Share capital A/c		-	18,00,000
	To Calls-in-Advance A/c		-	4,50,000
	To Bank A/c		-	1,50,000
	(Being application money adjusted and refunded)
(c)	Equity Share First Calls A/c    ...Dr.		24,00,000	-
	To Equity Share Capital A/c		-	24,00,000
	(Being first call money done)
(d)	Bank A/c    ...Dr.		19,32,000	-
	Calls in Arrears A/c    ...Dr.		18,000	-
	Calls-in-Advance A/c    ...Dr.		4,50,000	-
	To Equity Share First Calls A/c		-	24,00,000
	(Being call money received except on 6,000 shares)
(e)	Equity Share Capital A/c (6000 × 7)    ...Dr.		42,000	-
	To Calls in Arrears A/c		-	18,000
	To Forfeited Shares A/c		-	24,000
	(Being 6,000 shares forfeited for non payment of first call)
(f)	Bank A/c     ...Dr.		78,000	-
	To Equity Share Capital A/c		-	60,000
	To Securities Premium Reserves A/c		-	18,000
	(Being forfeited shares re-issued)
(g)	Forfeited Shares A/c    ...Dr.		24,000	-
	To Capital Reserve A/c		-	24,000
	(Being profit on reserve for to capital reserve)
(h)	Equity Share Final Calls A/c (5,94,000 × 6)     ...Dr.		35,64,000	-
	To Equity Share Capital A/c (5,94,000 × 3)		-	17,82,000
	To Securities Premium Reserves A/c (5,94,000 × 3)		-	17,82,000
	(Being final call due 5,94,000 share of ₹ 6 each, including premium)
	Bank A/c    ...Dr.		35,64,000	-
	To Equity Share Final Calls A/c		-	35,64,000
	(Being final call money received)

Working Note:

(1)

Applied Shares	Allotted Shares
50,000	Nil
4,00,000	3,00,000
3,50,000	3,00,000

(2) 

Calculation of unpaid allotment money by Rakesh

Allotted Shares = 6,000

Applied Shares = `(4,00,000)/(3,00,000)xx6,000`

= ₹ 8,000

	(₹)
First call money due (6,000 × 4)	24,000
Less: Adjusted from Application Calls-in-Arrears (2,000 × 3)	6,000
	18,000