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Sk Ltd. Invited Applications for Issuing 3,20,000 Equity Shares of Rs.10 Each at a Premium of Rs.5 per Share. the Amount Was Payable as Follows: on Application Rs.3 per Share (Including Premium Rs.1 per Share) on Allotment Rs.5 per Share (Including Premium Rs.2 per Share) - Accountancy

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SK Ltd. invited applications for issuing 3,20,000 equity shares of Rs.10 each at a premium of Rs.5 per share. The amount was payable as follows:

On application Rs.3 per share (including premium Rs.1 per share)

On allotment Rs.5 per share (including premium Rs.2 per share)

On First and Final Call - Balance

Applications for 4,00,000 shares were received. Applications for 40,000 shares were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with applications was adjusted towards sums due on allotment. Jeevan holding 800 shares failed to pay the allotment money and his shares were immediately forfeited. Afterwards final call was made. Ganesh who had applied for 2,700 shares failed to pay the final call. His shares were also forfeited. Out of the forfeited shares 1,500 shares were re-issued at Rs.8 per share fully paid up. The re-issued shares included all the forfeited shares of Jeevan.

Pass necessary journal entries for the above transactions in the books of the company.

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Solution

                                                                                                  Books of SK Ltd

                                                                                                         Journal

Date Particulars L.F. Dr.(Rs.) Cr.(Rs.)
 

Bank A/c                                                                                                                                        Dr

        To Equity Share Application A/c

(Being amount received on application for 4,00,000)

 

12,00,000

 

 

 

12,00,000

 

 

Equity Share Application A/c                                                                                                             Dr

         To Equity Share Capital A/c

         To Securities Premium A/c

         To Equity Share Allotment A/c

         To Bank A/c

(Being amount of application transferred to Share Capital and excess money is adjusted towards allotment)

 

12,00,000

 

 

 

 

 

 

6,40,000

3,20,000

1,20,000

1,20,000

 

 

Equity Share Allotment A/c                                                                                                               Dr

            To Equity Share Capital A/c

            To Securities Premium A/c

(Being amount due on allotment)

 

16,00,000

 

 

 

 

9,60,000

6,40,000

 

 

Bank A/c (Rs.16,00,000 – Rs.1,20,000 – Rs.3,700)                                                                             Dr

             To Equity Share Allotment A/c

(Being amount received on share allotment)

 

Share Capital A/c                                                                                                                            Dr

Securities Premium A/c                                                                                                                    Dr

               To Share Forfeiture A/c

               To Share Allotment A/c

(Being 800 shares of Jain are forfeited due to non – payment of allotment money)

 

14,76,300

 

 

 

4,000

1,600

 

 

 

 

14,76,300

 

 

 

 

1,900

3,700

 

 

Equity Share First and Final A/c                                                                                                        Dr

                To Equity Share Capital A/c

                To Securities Premium A/c

(Being amount due on first and final call on 3,19,200shares)

 

22,34,400

 

 

 

 

15,96,000

6,38,400

 

 

Bank A/c (Rs.22,34,400 – Rs.16,800)                                                                                                Dr

               To Equity Share First and Final Call A/c

(Being amount received on first and final call)

 

22,17,600

 

 

 

22,17,600

 

 

Equity Share Capital A/c                                                                                                                  Dr

Securities Premium A/c                                                                                                                   Dr

                 To Equity Share Forfeiture A/c

                 To Equity Share First and Final Call A/c

(Being shares of Gupta were forfeited)

 

24,000

4,800

 

 

 

 

 

12,000

16,800

 

 

Bank A/c                                                                                                                                        Dr

Share Forfeiture A/c                                                                                                                        Dr

                To Equity Share Capital A/c

(Being forfeited shares were re-issued at Rs.8 per share fully paid up)

 

12,000

3,000

 

 

 

 

15,000

 

 

Equity Share Forfeiture A/c                                                                                                               Dr

              To Capital Reserve A/c

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

 

2,400

 

 

 

2,400

 

 

                                                                                              Computation Table

Categories Applied Shares Shares Allotted Money Received on Application @ Rs.3 each Money transferred to Share Capital @ Rs.2 each Money transferred to Securities Premium @ Rs.1 each Excess Application money Amount Adjusted on Allotment Money refunded

I

II

40,000

3,60,000

 

3,20,000

1,20,000

10,80,000

 

6,40,000

 

3,20,000

1,20,000

1,20,000

 

1,20,000

1,20,000

 

  4,00,000 3,20,000 12,00,000 6,40,000 3,20,000 2,40,000 1,20,000 1,20,000

 

Calculation of amount unpaid on Allotment

`"Share Applied by Jeevan ="360000/320000xx800=900" Shares"`

 

Excess money received from Jeevan                                        = 300 (100 x 3)

Amount due on Allotment                                                        = 2,400 (800 x 3)

        Less : Excess Application Money                                      = Rs. 300

                                                                                          ___________________

Amount unpaid on Allotment                                                    = 2,100

Amount unpaid on Securities Premium                                      = 1,600 (800 x 2)

                                                                                          ___________________

Total amount unpaid on allotment                                             = Rs. 3,700

 

Calculation of amount received from Jeevan (Share Forfeiture (Cr)

Amount received on application                                                = 1,600 (800 x 2) ⇒ excluding premium

Add :Excess Application money                                                = 300

                                                                                           ____________________________________

Share Forfeiture (Cr.)                                                              = 1,900

 

Unpaid amount on First and Final Call

`"Share Allotted to Ganesh ="320000/360000xx2700=2400" Shares"`

Unpaid amount on First and Final Call = 16,800 (2,400 x 7)

 

Calculation of amount received from Ganesh (Share Forfeiture Cr.)

Amount received on application                                                  = Rs.4,800 (2,400 x 2) ⇒ excluding premium

Amount received on allotment                                                    = Rs.7,200 (2,400 x 3) ⇒ excluding premium

Total amount received                                                               = Rs.12,000

 

Calculation of Capital Reserve

(i) 800 shares of Jain are reissued

Share forfeiture (Cr.)                                          = 900

      Less :Share forfeiture (Dr.)                            = 1,600 (800 x 2)

                                                                       ___________________

Capital Reserve                                                  = 300

(ii) 700 Shares of Ganesh are reissued

Share Forfeiture (Cr.) for 700 shares                    = 3,500 [(12000/2400) x700]

        Less : Share Forfeiture (Dr.)                        = 1400 (700 x 2)

                                                                      ____________________________

Capital Reserve                                                  = 2,100

Total Amount of Capital Reserve                           = 2,400 (2,100 + 300)

Concept: Issue at Par and Premium and at Discount
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