Question

Park Hospitality Ltd. incorporated with authorised capital of ₹ 15,00,000, 1,50,000 equity shares of ₹ 10 each, issued 1,00,000 equity shares for subscription payable ₹ 4 on application, ₹ 3 on allotment and balance as first and final call. The shares were subscribed, and due amounts were received except first and final call on 4,000 shares held by Pawan. Rakesh holding 2,000 shares paid call on his shares along with allotment money. Shares of Pawan were forfeited. Later, half the shares were reissued as fully paid-up and ₹ 4,000 were transferred to Capital Reserve. Pass the Journal entry for reissue of shares.

Answer 1

Journal Entries for Reissue of Shares
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		10,000
	Forfeited Shares A/c   ...Dr.		10,000
	To Share Capital A/c			20,000
	(2,000 forfeited shares reissued as fully paid-up)
2.	Forfeited Shares A/c   ...Dr.		4,000
	To Capital Reserve A/c			4,000
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Face value per share: ₹ 10

Amount payable:

Application = ₹ 4

Allotment = ₹ 3

First and Final Call:

₹ 10 − ₹ 4 − ₹ 3 = ₹ 3

Pawan held 4,000 shares and did not pay the First and Final Call.

Amount received on Pawan's shares:

4,000 × (₹ 4 + ₹ 3) = 4,000 × ₹ 7 = ₹ 28,000

Therefore, Forfeited Shares A/c = ₹ 28,000.

Half of the forfeited shares were reissued:

`4,000 xx 1/2 = 2,000` shares

Proportionate forfeited amount on 2,000 shares:

`28,000 xx (2,000)/(4,000) = 14,000`

Given Capital Reserve = ₹ 4,000.

Therefore, discount allowed on reissue:

₹ 14,000 − ₹ 4,000 = ₹ 10,000

Share Capital credited:

2,000 × ₹ 10 = ₹ 20,000

Amount received on reissue:

₹ 20,000 − ₹ 10,000 = ₹ 10,000