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'Wellness Ltd.' Invited Applications for Issuing 40,000 Equity Shares of Rs 10 Each at a Discount of 10%. the Directors Forfeited Those Shares on Which Less than Rs 7 per Share Were Received. the Forfeited Shares Were Re-issued at `8 per Share as Fully Paid Up. Pass Necessary Journal Entries in the Books of the Company for the Above Transactions. - Accountancy

'Wellness Ltd.' invited applications for issuing 40,000 equity shares of Rs 10 each at a discount of 10%.

The amount was payable as follows :
On application and allotment - Rs 4 per share
On the first call - Rs 3 per share
On second and final call - the balance

Applications for 39,000 shares were received and the allotment was made to all the applicants.
The payment was received as per the following details:
On 30,000 shares - Full amount
On 6,000 shares - Rs 7 per share
On 3,000 shares - Rs  4 per share

The Directors forfeited those shares on which less than Rs 7 per share were received. The forfeited shares were re-issued at `8 per share as fully paid up.
Pass necessary Journal Entries in the books of the company for the above transactions.

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Solution

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

Dr.

Rs

Cr.

Rs

 

Bank A/c    Dr.

      To Equity Share Application and Allotment A/c

(Being amount received on an application for Rs 39,000)

 

1,56,000

 

 

 

1,56,000

 

 

Equity Share Application and Allotment A/c  Dr.

    To Equity Share Capital A/c

(Being amount of application transferred to Share
Capital)

 

1,56,000

 

 

 

 

1,56,000

 

 

 

Equity Share First Call A/c  Dr.

Discount on Issue of Shares A/c

   To Equity Share Capital A/c

(Being amount due on the first call)

 

1,17,000

39,000

 

 

 

 

1,56,000

 

 

Bank A/c (1,17,000 – 9,000)   Dr.

  To Equity Share First Call A/c

(Being amount received on the first call except on 3,000 shares)

 

1,08,000

 

 

 

 

1,08,000

 

 

 

Equity Share Second and Final Call A/c   Dr.

   To Equity Share Capital A/c  

(Being amount due on second and final call)

 

78,000

 

 

 

78,000

 

 

Bank A/c (78,000 – 18,000)   Dr.

   To Equity Share Second and Final Call A/c

(Being amount received on second and final call)

 

60,000

 

 

 

60,000

 

 

Equity Share Capital A/c  Dr.

   To Discount on Issue of Shares A/c

   To Equity Share Forfeiture A/c

   To Equity Share First Call A/c

   To Equity Share Second and Final Call A/c

(Being 3,000 shares were forfeited)

 

30,000

 

 

 

 

 

 

3,000

12,000

9,000

6,000

 

 

Equity Share Forfeiture A/c   Dr.

   To Capital Reserve A/c

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

 

9,000

 

 

 

 

9,000

 

 

Concept: Accounting Treatment of Forfeiture and Re-issue of Share
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