To Provide Employment to the Youth and to Develop a Backward Area of Jharkhand Which is Near One of the Coal Mines, Thermal Power Energies Ltd. Decided to Set-up a Thermal Power Plant of 500 Mega Watt Capacities. the Company Decided to Issue 10,00,000 Equity Shares of Rs.10 Each at a Premium of 70% to Finance the Project. - Accountancy

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To provide employment to the youth and to develop a backward area of Jharkhand which is near one of the coal mines, Thermal Power Energies Ltd. decided to set-up a Thermal Power Plant of 500 mega watt capacities. The company decided to issue 10,00,000 equity shares of Rs.10 each at a premium of 70% to finance the project.

Applications for 17,00,000 shares were received. Applications for 5, 00,000 shares were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining applicants. The whole of share money was payable on application.

Pass necessary journal entries for the above transactions in the books of the company and identify any two values which the company wants to convey to the society.

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Solution

                                                    In the books of Thermal Power Energies Ltd

                                                                               Journal

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

Bank A/c                                                                                                                         Dr

           To Equity Share Application & Allotment A/c

(Being amount received on 17, 00,000 equity shares @ Rs.10 each at a premium of 70%)

 

Equity Share Application & Allotment A/c                                                                            Dr

            To Equity Share Capital A/c

            To Securities Premium A/c

             To Bank A/c

(Being application money transferred to share capital and excess amount refunded)

 

2,89,00,000

 

 

 

2,89,00,000

 

 

 

 

 

2,89,00,000

 

 

 

1,00,00,000

70,00,000

1,19,00,000

 

The following are the two values that X Ltd. Wants to propagate.

1. Employment opportunities in the backward areas.

2. Value of Equality by allotting shares on pro-rata basis to 12,00,000 shareholders.

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