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Question 50 Chapter 8 of +2-Part-1
50. (Issue at premium/Pro-rata Allotment/Forfeiture/Re-issue) A applications for the subscription of 2,00,000 equity shares of Rs. 10 each, payable as Rs. 2.50 per share on application by 31st January, 2018, Rs. 5 (including premium) on allotment by 28February, 2018, and Rs. 5 on first and final call by 30th June, 2018.
The company received applications for 2,50,000 shares. It was decided :
(i) to refuse allotment to applicants for 10,000 shares,
(ii) to allot in full to the applicants for 40,000 shares,
(iii) to allot the balance of the available shares prorata among the other applicants, and
(iv) to utilize the excess application money in part payment of allotment moneys. One applicant to whom shares were allotted in full, did not pay the amount due on call his 200 shares were forfeited. These shares were reissued on 31st October, 2018 at Rs. 9, fully paid.
Give journal entries to record the above.
1 . Proportion of pro rata allotment
| Application Received | Shares Allotted | Total |
| 10,000 | 10,000 | Rejected |
| 40,000 | 40,000 | Full Allotment |
| 2,00,000 | 1,60,000 | Pro rata Allotment |
| 2,50,000 | 2,00,000 |
Hence Proportion of pro rata allotment is 20:16 or 5:4
2. Amount credited to capital reserve is arrived at as follows
| Rs. | |
| Total Amount forfeited | 1,000 |
| Less : discount on the reissue of forfeited shares | 200 |
| Profit on the reissue of forfeited shares | 800 |
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| 2018 | |||||
| Jan 31 | Bank A/c (2,50,000 X 2.5) | Dr. | 6,25,000 | ||
| To Equity Share Application A/c | 6,25,000 | ||||
| (Being the receipt of application money on 2,50,000 shares @ Rs. 2.5 per share ) | |||||
| Jan 31 | Equity Share Application A/c | Dr. | 5,00,000 | ||
| To Equity Share capital A/c (2,00,000 X 2.5) | 5,00,000 | ||||
| (Being transfer of application money on 2,00,000 shares allotted to shares cap. A/c) | |||||
| Jan 31 | Equity Share Application A/c (10,000 X 2.5) | Dr. | 25,000 | ||
| To Bank A/c | 25,000 | ||||
| (Being the refund of app. Money on 10,000 share rejected ) | |||||
| Jan 31 | Equity Share Application A/c | Dr. | 1,00,000 | ||
| To Equity Share capital A/c | 1,00,000 | ||||
| (Being excess of app. Money adjusted towards allotment A/c ) | |||||
| Feb 28 | Equity Share Application A/c (2,00,000 X 5) | Dr. | 10,00,000 | ||
| To Equity Share capital A/c (2,00,000 X 2.5) | 5,00,000 | ||||
| To Securities Premium Reserve A/c(2,00,000 X 2.5) | 5,00,000 | ||||
| (Being allotment money due on 2,00,000 shares @ Rs. 5 each including premium Rs. 2.5 per share) | |||||
| Feb 28 | Bank A/c | Dr. | 9,00,000 | ||
| To Equity Share final Call A/c | 9,00,000 | ||||
| (Being amount received on allotment ) | |||||
| June 30 | Equity Share First & final Call A/c | Dr. | 10,00,000 | ||
| To Equity Share capital A/c | 10,00,000 | ||||
| (Being amount due on A/c of the first & Final call on 2,00,000 shares @ Rs. 5 per share) | |||||
| June 30 | Bank A/c | Dr. | 9,99,000 | ||
| To Equity Share First & final Call A/c | 9,99,000 | ||||
| (Being amount received on A/c of the first & Final call on 1,99,800 shares @ Rs. 5 per share) | |||||
| Oct 31 | Equity Share capital A/c | Dr. | 2,000 | ||
| To Share Forfeited A/c | 1,000 | ||||
| To Equity Share First & final Call A/c | 1,000 | ||||
| (Being forfeiture of 200 shares of Rs. 10 each issued at premium of Rs. 2.5 each fully called up on A/c of the non payment of First & final call ) | |||||
| Oct 31 | Bank A/c | Dr. | 1,800 | ||
| Share Forfeited A/c | Dr. | 200 | |||
| To Equity Share Capital A/c | 2,000 | ||||
| (Being reissue of 200 shares @ Rs. 9 per share issued as fully paid up ) | |||||
| Oct 31 | Share Forfeited A/c | Dr. | 800 | ||
| To Equity Share Capital A/c | 800 | ||||
| (Being the profit on reissue of 200 shares transferred to cap.. A/c | |||||
It all about Question 50 Chapter 8 of +2-Part-1, If you have any problem please comment below.
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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