Question 46 Chapter 8 of +2-Part-1 – USHA Publication 12 Class Part – 1

Q-46 - CH-8 - Usha +2 Book 2018 - Solution

Question 46 Chapter 8 of +2-Part-1 – USHA

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46. (Issue at Premium/Prorata Allotment/Forfeiture) PCS Ltd. issued a prospectus inviting application for 20,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows:
on application Rs. 5 (including premium)
on allotment Rs.4
on call Rs. 3
Applications were received for 30,000 shares and allotment was made Prorata to applicant. for 24.000 shares. Excess money paid on application for these shares was utilised towards payment of allotment money. Vishal who applied for 600 shares failed to pay the allotment money and on his subsequent failure to pay the call, his shares were forfeited .Pass the necessary entries in the books of PCS Ltd.

The solution of Question 46 Chapter 8 of +2 Part-1 – USHA

Journal

Date   Particulars
L.F. Debit Credit
A) Bank A/c Dr.   1,50,000  
  To Share Application A/c       1,50,000
  (Being the receipt of application money)        
           
B)  Share Application A/c Dr.   1,50,000  
  To Share capital A/c     60,000
  To Security Premium Reserve A/c     40,000
  To Share allotment A/c     30,000
  To Bank A/c     20,000
  (Being 20,000 shares allotted )        
           
C) Share allotment Call A/c Dr.   80,000  
  To Share capital A/c     80,000
  (Being amount due on allotment)        
         
D) Bank A/c Dr.   58,200  
  Calls in arrears A/c Dr.   1,800  
  To Share allotment A/c     60,000
  (Being amount received on allotment)      
         
E) Share Call A/c Dr.   60,000  
  To Share capital A/c     60,000
  (Being amount due on first call)      
         
F) Share Fortified A/c Dr.   720  
  To Capital Reserve A/c     720
  (Being balance in share fortified transferred to capital reserve)      
         
G) Bank A/c Dr.   58,200  
  Calls in arrears A/c Dr.   1,800  
  To Share allotment A/c     60,000
  (Being amount received on call)      
         
H) Share capital A/c Dr.   6,000  
  To Share Forfeited A/c     2,400
  To Calls in Arrears A/c     3,600
  (Being 600 shares fortified)      

Working Notes :

Shares applied = 24,000/20,000 X 600 = 720 shares      
       
Excess app. money retained for allotment      
(720 X 5) – (600X5) = Rs. 600      
       
Allotment not received on 600 shares      
600 X 4     2,400
Less : Retained     600
Not received     1,800
Allotment received:      
Total amount due     80,000
Less : Already received 20,000    
Less : not received 1,800   21,800
      58,200
Amount credited to share forfeited A/c      
Received on application : 720 X 5     3,600
Less : Adjustment on premium :600 X 2     1,200
      2,400

Note: Premium received Rs. 1,200 can’t be forfeited

This is all about the Question 46 Chapter 8 of +2-Part-1 – USHA

You can check out the following article to better understand:

Forfeiture of shares – Its accounting Entries

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Forfeiture of shares – Its accounting Entries – In Hindi

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Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)

Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)

Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)

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Chapter No. 4 – Ratio Analysis

Chapter No. 5 – Cash Flow Statement

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