Question

MG Enterprises Ltd. was set up with authorised capital of ₹ 12,00,000 divided into 1,20,000 equity shares of ₹ 10 each. The company allotted 4,000 equity shares as fully paid to the signatories of the Memorandum of Association and 3,000 equity shares as fully paid to the Vendor for purchase of Machinery. It also issued 20,000 equity shares to public for subscription, issue price being ₹ 12 per share. The issue price was payable as under: on Application- ₹5, on Allotment- ₹ 5, on First and Final call-balance. The company did not make call during the year. Applications were received for 22,000 shares. Allotment was made on pro rata basis to all the applicants. All money were duly received except the allotment money on 2,000 shares which were forfeited. Later 500 of the forfeited shares were reissued at ₹ 6 per share, ₹ 8 called-up.

Answer the following questions on the basis of the above information:

1. State the amount of Issued Capital.
   1. ₹ 2,00,000
   2. ₹ 30,000
   3. ₹ 2,70,000
   4. ₹ 2,50,000
2. On shares being forfeited, Securities Premium Account will be debited by
   1. Nil.
   2. ₹ 1,000.
   3. ₹ 2,000.
   4. ₹ 4,000.
3. State the amount of Subscribed and Fully Paid-up Capital.
   1. ₹ 1,60,000
   2. ₹ 1,00,000
   3. ₹ 70,000
   4. ₹ 2,00,000
4. State the amount of Subscribed but not Fully Paid-up Capital.
   1. ₹ 1,20,000
   2. ₹ 1,48,000
   3. ₹ 1,60,000
   4. ₹ 2,00,000
5. State the balance of 'Forfeited Shares Account'after reissue of shares.
   1. ₹ 6,000
   2. ₹ 7,500
   3. ₹ 8,000
   4. ₹ 5,000
6. State the amount of share capital which will bee shown in the Balance Sheet of the company.
   1. ₹ 2,20,000
   2. ₹ 2,25,000
   3. ₹ 2,29,500
   4. ₹ 2,25,500

Answer 1

(A) ₹ 2,70,000

Explanation:

Total shares issued:

4,000 + 3,000 + 20,000 = 27,000 shares

27,000 × ₹ 10 = ₹ 2,70,000

(B) ₹ 4,000

Explanation:

Issue price = ₹ 12 and face value = ₹ 10. Therefore, premium is:

₹ 12 − ₹ 10 = ₹ 2 per share

Premium on 2,000 forfeited shares was not received:

2,000 × ₹ 2 = ₹ 4,000

(C) ₹ 70,000

Explanation:

Fully paid shares were issued to the signatories and vendor:

4,000 + 3,000 = 7,000 shares

7,000 × ₹ 10 = ₹ 70,000

The 500 reissued shares are only ₹ 8 called-up, so they are not fully paid-up.

(D) ₹ 1,48,000

Explanation:

Public shares remaining after forfeiture:

20,000 − 2,000 = 18,000

Add 500 shares reissued:

18,000 + 500 = 18,500 shares

₹ 8 per share is called-up:

18,500 × ₹ 8 = ₹ 1,48,000​

(E) ₹ 7,500

Explanation:

Amount forfeited on 2,000 shares:

2,000×₹5=₹10,000

Amount relating to 500 shares reissued:

`10,000 xx 500/2000 = 2,500`

Therefore, balance remaining:

₹ 10,000 − ₹ 2,500 = ₹ 7,500​

(F) ₹ 2,25,500

Explanation:

Fully Paid-up Capital = ₹ 70,000

Not Fully Paid-up Capital = ₹ 1,48,000

Add: Forfeited Shares = ₹ 7,500

₹ 70,000 + ₹ 1,48,000 + ₹ 7,500 = ₹ 2,25,500​