Question

Max Ltd. forfeited 500 shares of ₹ 100 each for non-payment of first call of ₹ 20 per share and final call of ₹ 25 per share. 250 of these shares were reissued at ₹ 50 per share fully paid-up.

Pass the necessary Journal entries in the books of Max Ltd. for forfeiture and reissue of shares. Also, prepare the Share Forfeiture Account.

Answer 1

Journal Entries in the Books of Max Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		50,000
	To Shares First Call A/c			10,000
	To Shares Final Call A/c			12,500
	To Share Forfeiture A/c			27,500
	(500 shares forfeited for non-payment of First Call and Final Call)
2.	Bank A/c   ...Dr.		12,500
	Share Forfeiture A/c   ...Dr.		12,500
	To Share Capital A/c			25,000
	(250 forfeited shares reissued @ ₹ 50 per share as fully paid-up)
3.	Share Forfeiture A/c   ...Dr.		1,250
	To Capital Reserve A/c			1,250
	(Gain on reissue transferred to Capital Reserve)

 

Share Forfeiture Account
Dr. Particulars	₹	Cr. Particulars	₹
To Share Capital A/c	12,500	By Share Capital A/c	27,500
To Capital Reserve A/c	1,250
To Balance c/d	13,750
Total	27,500	Total	27,500

Working Note:

Face value per share: ₹ 100

First Call unpaid: ₹ 20 per share

Final Call unpaid: ₹ 25 per share

Amount received per share before forfeiture:

₹ 100 − ₹ 20 − ₹ 25 = ₹ 55

Amount credited to Share Forfeiture A/c:

500 × ₹ 55 = ₹ 27,500

Reissue of 250 Shares:

Amount received:

250 × ₹ 50 = ₹ 12,500

Share Capital credited:

250 × ₹ 100 = ₹ 25,000

Discount on reissue:

₹ 25,000 − ₹ 12,500 = ₹ 12,500

Forfeited amount relating to 250 shares reissued:

`27,500 xx 250/500 = 13,750`

Gain transferred to Capital Reserve:

₹ 13,750 − ₹ 12,500 = ₹ 1,250​