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Ratan Limited Invited Applications for Issuing 12,000 Equity Shares of Rs 100 Each at a Premium of Rs 75 per Share. the Amount Was Payable as Follows : Pass Necessary Journal Entries for the Above Transactions in the Books of 'Ratan Limited'. - CBSE (Arts) Class 12 - Accountancy

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Question

Ratan Limited invited applications for issuing 12,000 equity shares of Rs 100 each at a premium of Rs 75 per share. The amount was payable as follows :

On application and allotment — Rs 100 per share (including Rs 50 premium)
On first and final call — The balance
Applications for 15,000 shares were received. Shares were allotted on pro-rata basis to all applicants. Excess money received with applications was adjusted towards sums due on first and final call. Govind who had applied for 300 shares paid the full share money at the time of applying for shares. Girdhar, who had applied for 600 shares, failed to pay the first and final call money. His shares were forfeited. Out of the forfeited shares, 300 shares were re-issued at Rs 90 per share as fully paid-up.
Pass necessary journal entries for the above transactions in the books of 'Ratan Limited'.

Solution

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

Dr.

Rs

Cr.

Rs

 

Bank A/c (15,00,000 + 22,500)     Dr.

   To Equity Share Application and Allotment A/c

(Being amount received on application 15,000 shares, along with calls – in - advance)

 

15,22,500

 

 

15,22,500
 

Equity Share Application and Allotment A/c   Dr.

   To Equity Share Capital A/c

   To Securities Premium A/c

   To Equity Share First and Final Call A/c

   To Bank A/c

(Being amount of application transferred to Share Capital and excess money is adjusted in first and final call account)

 

15,22,500

 

 

 

 

 

 

 

6,00,000

6,00,000

3,12,000

10,500

 

 

 

 

Equity Share First and Final Call A/c    Dr.

   To Equity Share Capital A/c

   To Securities Premium A/c

(Being amount due on first and final call)

 

9,00,000

 

 

 

 

6,00,000

3,00,000

 

 

Bank A/c (9,00,000 – 3,12,000 – 24,000)   Dr.

   To Equity Share First and Final Call A/c

(Being amount received on first and final call)

 

5,64,000

 

 

 

5,64,000

 

 

Equity Share Capital A/c            Dr.

Securities Premium A/c

   To Equity Share Forfeiture A/c

   To Equity Share First and Final Call A/c

(Being Giridhar’s shares were forfeited)

 

48,000

12,000

 

 

 

 

 

36,000

24,000

 

 

Bank A/c      Dr.

Equity Share Forfeiture A/c   Dr.

  To Equity Share Capital A/c

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

 

27,000

3,000

 

 

 

30,000
 

Equity Share Forfeiture A/c   Dr.

   To Capital Reserve A/c

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

 

19,500

 

 

 

19,500

 

 

Working Notes:

WN 1:
Calculation of amount refunded to Govind

Shares allotted to Govind = `12000/15000 xx 300 = 240 " shares"`

Amount received on 300 shares of 100 each = 30,000

Amount transferred to Share Capital A/c (240 x 50) =12,000

Amount transferred to Securities Premium A/c (240 x 50) = 12,000
Excess money received on application and Allotment = 6,000
Amount due on First call @ 75 each = 18,000
Amount adjusted on First Call = 12,000 (18,000 – 6,000)

Actual amount received from Govind on 300 shares @ 175 = 52,500
Amount to be adjusted on 240 shares @ 175 = 42,000
Therefore, Amount refunded = 10,500 (52,500 – 42,000)

WN2:
Calculation of amount not received from Girdhar

Shares allotted to Giridhar = `12,000/15000 xx 600 = 480` shares

Amount received on 600 shares of 100 each = 60,000
Amount transferred to Share Capital A/c (480 x 50) = 24,000
Amount transferred to Securities Premium A/c (480 x 50) = 24,000
Excess money received on Application and Allotment = 12,000
Amount due on First Call @ 75 each = 36,000
Amount not received on First Call = 24,000 (36,000 – 12,000)

WN 3:

Calculation of amount transferred to Capital Reserve

Share Forfeiture of 480 shares = 36000

Share Forfeiture of 300 shares =`36000/480 xx 300= 22500`

  Is there an error in this question or solution?

APPEARS IN

Solution Ratan Limited Invited Applications for Issuing 12,000 Equity Shares of Rs 100 Each at a Premium of Rs 75 per Share. the Amount Was Payable as Follows : Pass Necessary Journal Entries for the Above Transactions in the Books of 'Ratan Limited'. Concept: Accounting Treatment of Forfeiture and Re-issue of Share.
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