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Super Star Ltd. Issued a Prospectus Inviting Applications for 2,000 Shares of ₹ 10 Each at a Premium of ₹ 2 per Share , Payable As: - Accountancy

Journal Entry

Super Star Ltd. issued a prospectus inviting applications for 2,000 shares of ₹  10 each at a premium of ₹  2 per share , payable as:

On application   ---  ₹ 3 per share (including ₹  1 premium),
On allotment   ---  ₹  4 per share (including ₹  1 premium),
On first call   ---  ₹  3 per share
On second and final call   ---  ₹  2 per share.

Applications were received for 3,000 shares and pro rata allotment was made on the applications for 2,400 shares . It was decided to utilise excess application money towards  the amount due on allotment .
Ramesh, to whom 40 shares  were allotted , failed  to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited.
Rajesh, who applied  for 72 shares failed to pay  the two calls and on such failure, his shares were forfeited . 
Of the shares forfeited, 80 shares were sold to Krishan credited as fully paid-up for ₹  9 per share, the whole of Ramesh's shares being  included.
Give journal entries to record the above transactions ( including cash transactions). 

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Solution

Issued capital 2,000 shares of Rs 10 each at premium of Rs 2 

Applied shares 3,000

Allotment made as:

 

Payable as:

 

Applied

 

Allotted

 

Application

Rs 3

(2 + 1)

2,400

 

2,000

 

Allotment

Rs 4

(3 + 1)

600

 

NIL

 

First Call

Rs 3

 

 

 

 

 

Final Call

Rs 2

 

3,000

 

2,000

 

 

Rs 12

(10 + 2) per share

Books of Super Star Ltd.

Journal

Date

Particulars 

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Bank A/c

Dr.

 

9,000

 

 

To Share Application A/c

 

 

9,000

 

(Share application money received for 3,000 shares at Rs 3 per share including Re 1 premium)

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

9,000

 

 

To Share Capital A/c

 

 

4,000

 

To Securities Premium A/c

 

 

2,000

 

To Share Allotment A/c

 

 

1,200

 

To Bank A/c

 

 

1,800

 

(Share application money of 2,000 shares transferred to Share Capital and securities premium at Rs 2, and Re 1 each respectively, Rs 1,800 adjusted on allotment and remaining Rs 1,200 refunded)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

8,000

 

 

To Share Capital A/c

 

 

6,000

 

To Securities Premium A/c

 

 

2,000

 

(Allotment due on 2,000 shares at Rs 4 per share including Re 1 premium)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

6,664

 

 

To Share Allotment A/c

 

 

6,664

 

(Allotment received for 1960 shares after adjustment of excess application money)

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

6,000

 

 

To Share Capital A/c

 

 

6,000

 

(First call due on 2,000 shares of at Rs 3 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

5,700

 

 

To Share First Call A/c

 

 

5,700

 

(Share First Call received for 1,900 shares)

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

320

 

 

Securities Premium A/c

Dr.

 

40

 

 

To Share Forfeiture A/c (144 – 40)

 

 

104

 

To Share Allotment A/c

 

 

136

 

To Share First Call A/c

 

 

120

 

(40 shares of Rs 10 each, Rs 8 called-up for non-payment of money due on allotment and first including Re 1 premium)

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

3,920

 

 

To Share Capital A/c

 

 

3,920

 

(Final call due on 1,960 shares at Rs 2 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

3,800

 

 

To Share Final Call A/c

 

 

3,800

 

(Final call received for 1,900 shares)

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

600

 

 

To Share Forfeiture A/c

 

 

300

 

To Share First Call A/c

 

 

180

 

To Share Final Call A/c

 

 

120

 

(60 shares forfeited for the non-payment of first call and final call money)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

720

 

 

Share Forfeiture A/c

Dr.

 

80

 

 

To Share Capital A/c

 

 

800

 

(80 shares of Rs 10 each re-issued at Rs 9 per share fully paid-up)

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

224

 

 

To Capital Reserve A/c

 

 

224

 

(Balance in Share Forfeiture Account of 80 re-issued shares transferred to Capital Reserve)

 

 

 

Working Notes-

Ramesh’s Shares

Number of shares applied=`2400/2000 xx 40 = 48 "shares"`

Money received on Application (48 shares × Rs 3)

=

Rs

144

Less: Application money adjusted to Share Capital (40 shares × Rs 2)

=

Rs

80

Less: Securities Premium (40 shares × Re 1)

=

Rs

40

Excess money Application 

=

Rs

24

 

Allotment due (40 shares × Rs 4)

=

Rs

160

Less: Excess money on Application

=

Rs

24

Calls-in-Arrears

 

Rs

136

Rajesh’s Shares

Number of shares allotted = `2000 / 2400 xx 72 = 60 shares`

Share Allotment

Money due on Allotment (2,000 shares × Rs 4)

8,000

Less: Excess application money adjusted

1,200

Less: Calls-in-Arrears

136

Money received on Allotment

6,664

Share First Call

Money due on First Call (2,000 shares × Rs 3)

6,000

Less: Calls-in-Arrears on Ramesh (40 shares × 3)

120

Less: Calls-in-Arrears on Rajesh (60 shares × 3)

180

Money received on First Call

5,700

Share Final Call

Money due on Final Call (1,960 shares × Rs 2)

3920

Less: Calls in Arrest on Rajesh (60 shares × Rs 2)

120

Money received on Final Call

3,800

Capital Reserve

Ramesh 

Money received from Ramesh

144

Less: Securities Premium (40 shares × Re 1)

40

Share Forfeiture

Cr.

104

Share forfeiture 40 × Rs 1

Dr.

40

Capital Reserve of Ramesh

64

Rajesh 

Share Forfeiture

Cr.

Rs

5 per share

Share Forfeiture

Dr.

Rs

1 per share

Share Forfeiture after re-issue

Rs

4 per share

Capital Reserve on Rajesh’s shares = Share Forfeiture after re-issue (per share) × No. of shares re-issued

= Rs 4 × 40

= Rs 160

Total Capital Reserve = Capital Reserve of 40 shares of Ramesh + Capital Reserve of 40

shares of Rajesh

= 64 + 160

= Rs 224 

  Is there an error in this question or solution?
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 2
Chapter 1 Accounting for Share Capital
Exercise | Q 90 | Page 129
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