Question

SaReGaMa Ltd. invited applications for issuing 80,000 equity shares of ₹ 100 each at a premium of ₹ 10. The amount was payable as follows:

On Application	₹ 30
On Allotment	₹ 30
On First Call	₹ 30
On Final Call	Balance

Applications of 1,20,000 shares were received. Allotment was made on pro rata basis to all applicants. Excess money received on application was adjusted on sums due on allotment. Dhwani, who was allotted 1,600 shares, failed to pay allotment money and Sargam who applied for 6,000 shares did not pay first call money. These shares were forfeited immediately after first call. 2,000 of these shares (including all shares of Dhwani were issued to Tarang for ₹ 95 per share as ₹ 80 paid-up. Pass necessary Journal entries in books of Saregama Ltd. by opening Calls-in-Arrear and Calls-in-Advance Accounts, if final call has not been made.

Answer 1

Journal Entries in the Books of SaReGaMa Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		36,00,000
	To Equity Shares Application A/c			36,00,000
	(Application money received on 1,20,000 shares @ ₹ 30 per share)
2.	Equity Shares Application A/c   ...Dr.		36,00,000
	To Equity Share Capital A/c			24,00,000
	To Equity Shares Allotment A/c			12,00,000
	(Application money transferred and excess adjusted towards allotment)
3.	Equity Shares Allotment A/c   ...Dr.		24,00,000
	To Equity Share Capital A/c			16,00,000
	To Securities Premium A/c			8,00,000
	(Allotment money due @ ₹ 30 per share including premium ₹ 10)
4.	Bank A/c   ...Dr.		11,76,000
	Calls-in-Arrears A/c   ...Dr.		24,000
	To Equity Shares Allotment A/c			12,00,000
	(Balance allotment money received except from Dhwani)
5.	Equity Shares First Call A/c   ...Dr.		24,00,000
	To Equity Share Capital A/c			24,00,000
	(First Call due on 80,000 shares @ ₹ 30 per share)
6.	Bank A/c   ...Dr.		22,32,000
	Calls-in-Arrears A/c   ...Dr.		1,68,000
	To Equity Shares First Call A/c			24,00,000
	(First Call received except from Dhwani and Sargam)
7.	Equity Share Capital A/c   ...Dr.		1,28,000
	Securities Premium A/c   ...Dr.		16,000
	To Calls-in-Arrears A/c			72,000
	To Share Forfeiture A/c			72,000
	(1,600 shares of Dhwani forfeited for non-payment of allotment and First Call)
8.	Equity Share Capital A/c   ...Dr.		3,20,000
	To Calls-in-Arrears A/c			1,20,000
	To Share Forfeiture A/c			2,00,000
	(4,000 shares of Sargam forfeited for non-payment of First Call)
9.	Bank A/c   ...Dr.		1,90,000
	To Equity Share Capital A/c			1,60,000
	To Calls-in-Advance A/c			30,000
	(2,000 forfeited shares reissued @ ₹ 95 per share as ₹ 80 paid-up)
10.	Share Forfeiture A/c   ...Dr.		92,000
	To Capital Reserve A/c			92,000
	(Gain on reissue transferred to Capital Reserve)

Working Notes:

Face value per share: ₹ 100

Premium per share: ₹ 10

Amount payable:

Application: ₹ 30

Allotment: ₹ 30, including premium ₹ 10

First Call: ₹ 30

Final Call: ₹ 20, not yet made

Applications received = 1,20,000 shares

Shares allotted = 80,000 shares

Pro rata ratio:

1,20,000 : 80,000 = 3 : 2

1. Application Money

Application money received:

1,20,000 × ₹ 30 = ₹ 36,00,000

Application money required:

80,000 × ₹ 30 = ₹ 24,00,000

Excess application money adjusted towards allotment:

₹ 36,00,000 − ₹ 24,00,000 = ₹ 12,00,000

2. Dhwani's Shares

Dhwani was allotted 1,600 shares.

Shares applied for:

1,600 × 32 = 2,400 shares

Application money paid:

2,400 × ₹ 30 = ₹ 72,000

Application money required:

1,600 × ₹ 30 = ₹ 48,000

Excess adjusted towards allotment:

₹ 72,000 − ₹ 48,000 = ₹ 24,000

Allotment due:

1,600 × ₹ 30 = ₹ 48,000

Balance allotment unpaid:

₹ 48,000 − ₹ 24,000 = ₹ 24,000

First Call unpaid:

1,600 × ₹ 30 = ₹ 48,000

Thus, Calls-in-Arrears relating to Dhwani:

₹ 24,000 + ₹ 48,000 = ₹ 72,000

At forfeiture:

1,600 × ₹ 80 = ₹ 1,28,000

Securities Premium not received:

1,600 × ₹ 10 = ₹ 16,000

Therefore, amount credited to Share Forfeiture A/c:

₹ 1,28,000 + ₹ 16,000 − ₹ 72,000 = ₹ 72,000

3. Sargam's Shares

Sargam applied for 6,000 shares.

Shares allotted:

6,000 × 23 = 4,000 shares

He did not pay the First Call:

4,000 × ₹ 30 = ₹ 1,20,000

Amount received towards Share Capital before forfeiture:

4,000 × (₹ 30 + ₹ 20) = ₹ 2,00,000

Thus, Share Forfeiture A/c credited = ₹ 2,00,000.

4. Reissue and Capital Reserve

2,000 shares reissued include:

Dhwani's shares = 1,600

Sargam's shares = 400

Forfeited amount relating to Dhwani:

₹ 72,000

Forfeited amount relating to 400 shares of Sargam:

`2,00,000 xx 400/(4,000) = 20,000`

Total amount available for Capital Reserve:

₹ 72,000 + ₹ 20,000 = ₹ 92,000

Since shares were reissued for ₹ 95 each as ₹ 80 paid-up, the excess ₹ 15 per share is treated as Calls-in-Advance:

2,000 × ₹ 15 = ₹ 30,000