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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 - Accountancy

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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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Solution

Books of KS 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 3,20,000)

 

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 is 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 (9,60,000 – 3,20,000 - 3,200)                                                                                                     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 800 shares of Jain are forfeited due to non – payment of allotment money)

 

Equity Share First Call A/c                                                                                                                       Dr

               To Equity Share Capital A/c

               To Securities Premium A/c

(Being amount due on first and final call on 1,59,200 shares)

 

Bank A/c (9,55,200 – 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 Gupta’s shares forfeited)

 

Bank A/c                                                                                                                                                Dr

Share Forfeiture A/c                                                                                                                                Dr

                  To Equity Share Capital A/c

(Forfeited shares were re-issued at `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)

 

12,80,000

 

 

 

12,80,000

 

 

 

 

 

 

9,60,000

 

 

 

 

6,36,800

 

 

 

4,800

2,400

 

 

 

 

9,55,200

 

 

 

 

9,50,400

 

 

 

8,000

1,600

 

 

 

 

8,000

2,000

 

 

 

3,200

 

 

 

12,80,000

 

 

 

4,80,000

1,60,000

3,20,000

3,20,000

 

 

 

4,80,000

4,80,000

 

 

 

6,36,800

 

 

 

 

4,000

3,200

 

 

 

6,36,800

3,18,400

 

 

 

9,50,400

 

 

 

 

4,800

4,800

 

 

 

 

10,000

 

 

 

3,200

 

 

Category Applied Shares Shares Allotted Money Received on Application @ Rs.4 each Money transferred to Share Capital @ Rs3 each Money transferred to Securities Premium @ Rs1 each Excess Application money Amount Adjusted on Allotment Money refunded

I

II

80,000

2,40,000

 

1,60,000

3,20,000

9,60,000

 

4,80,000

 

1,60,000

3,20,000

3,20,000

 

3,20,000

3,20,000

 

  3,20,000 1,60,000 12,80,000 4,80,000 1,60,000 6,40,000 3,20,000 3,20,000

 

Calculation of amount unpaid on Allotment

Share Applied by Jain = (2,40,000/1,60,000) x 800 = 1,200 shares

Excess money received from Jain                                        = 1,600 (400 x 4)

Amount due on Allotment                                                    = 2,400 (800 x 3)

        Less : Excess Application Money                                   = 1,600

                                                                                     ____________________

Amount unpaid on Allotment                                                 = 800

Amount unpaid on Securities Premium                                   = 2,400 (800 x 3)

                                                                                     ____________________

Total amount unpaid on allotment                                          = 3,200

 

Working Note : Amount received from Jain (Share Forfeiture.(Cr)

Amount received on application                              = 2,400 (800 x 3) [Premium excluded]

Add :Excess Application money                               = 1,600

                                                                           ________________________________________

Share Forfeiture (Cr.)                                             = 4,000

Unpaid amount on First and Final Call

Share Allotted to Gupta = (1,60,000/2,40,000) x 1,200 = 800 shares

Unpaid amount on Allotment = 4,800 (800 6)

Calculation of amount received from Gupta (Share Forfeiture.Cr.)

Amount received on application                               = 2,400 (800 x 3) [Premium excluded]

Amount received on allotment                                 = 2,400 (800 x 3) [Premium excluded]

Total amount received                                            = 4,800

Calculation of Capital Reserve

(i) 800 shares of Jain are reissued

Share forfeiture (Cr.)                               = 4,000

        Less :Share forfeiture (Dr.)               = 1,600 (800 x 2)

Capital Reserve                                        = 2,400

(ii) 200 Shares of Gupta are reissued

Share Forfeiture (Cr.) for 200 shares           = 1,200 [(4,800/800)x200]

           Less: Share Forfeiture (Dr.)             = 400 [200 x 2]

Capital Reserve                                         = 800

Total Amount of Capital Reserve                 = 3,200 [2,400 + 800]

Concept: Accounting Treatment of Forfeiture and Re-issue of Share
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