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Luxury Cars Ltd.' Invited Applications for Issuing 10,000 Equity Shares of Rs 50 Each at a Premium of Rs 100 per Share. the Amount Was Payable as Follows : Pass Necessary Journal Entries for the Above Transaction in the Books of the Company. - Accountancy

Luxury Cars Ltd.' invited applications for issuing 10,000 equity shares of Rs 50 each at a premium of Rs 100 per share. The amount was payable as follows :

On application - Rs 75 per share (including Rs 50 premium)
On allotment - The balance

The issue was fully subscribed. A shareholder holding 400 shares paid his entire share money at the time of application. Another shareholder holding 300 shares did not pay the allotment money. His shares were forfeited. The forfeited shares were later on re-issued for Rs 90 per share as fully paid up.
Pass necessary journal entries for the above transaction in the books of the company.

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Solution

In the books of Luxury Cars Ltd
Journal Entry
Date Particulars L.F.

Dr.

Rs

Cr.

Rs

 

Bank A/c   Dr.

     To Equity Share Application A/c

(Being amount received on an application for 10,000 shares
along with first call money on 400 shares)

 

7,80,000

 

 

 

 

7,80,000

 

 

 

Equity Share Application A/c   Dr.

    To Equity Share Capital A/c

    To Securities Premium A/c

    To Calls-in-Advance A/c

(Being amount of application transferred to Share Capital and securities premium)

 

7,80,000

 

 

 

 

 

 

2,50,00

5,00,000

30,000

 

 

 

Equity Share Allotment A/c    Dr.

   To Equity Share Capital A/c

   To Securities Premium A/c

(Being amount due on Allotment)

 

7,50,000

 

 

 

 

2,50,000

5,00,000

 

 

Bank A/c (7,50,000 – 30,000 – 22,500)  Dr.

Calls – in – Advances A/c            Dr.

   To Equity Share Allotment A/c

(Being amount received on share Allotment)

 

6,97,500

30,000

 

 

 

 

7,27,500

 

 

Equity Share Capital A/c  Dr.

Securities Premium A/c  Dr.

   To Equity Share Forfeiture A/c

   To Equity Share Allotment A/c

(Being 300 shares forfeited)

 

15,000

15,000

 

 

 

 

 

7,500

22,500

 

 

Bank A/c     Dr.

   To Equity Share Capital A/c

   To Securities Premium A/c

(Being forfeited shares were reissued for 90 as fully paid up)

 

27,000

 

 

 

 

15,000

12,000

 

 

Equity Share Forfeiture A/c    Dr.

    To Capital Reserve A/c

(Being excess amount on forfeiture is transferred to capital
reserve)

 

7,500

 

 

 

7,500

 

Working Notes:

WN1: Calculation of Amount received on Application

Application amount received on 10,000 shares   = 7,50,000

Shareholders of 400 shares paid in advance (400 x 75) = 30,000

Total amount = 7,80,000

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