Sponsor Area
Joy Ltd. issued 1,00,000 equity shares of Rs 10 each. The amount was payable as follows:
On application Rs 3 per share.
On allotment Rs 4 per share.
On 1st and final call balance.
Applications for 95,000 shares were received and shares were allotted to all the applicants. Sonam to whom 500 shares were allotted failed to pay allotment money and Gautam paid his entire amount due including the amount due on first and final call on the 750 shares allotted to him along with allotment. The amount received on allotment was
(a) Rs 3,80,000
(b) Rs 3,78,000
(c) Rs 3,80,250
(d) Rs 4,00,250
Amount received on allotment is option (c) Rs 3,80,250.
| Particulars | Amount (Rs.) |
Amount due on allotment (95000 * 4) Less: Allotment not received on 500 shares Add: First and Final call money received on 750 shares |
3,80,0000 2,000 2,250 |
| Net Amount Received on Allotment | 3,80,250 |
Give the meaning of forfeiture of shares.
Forfeiture of share means the cancellation of allotment due to breach of contract and to treat the amount already received on such shares as forfeited to the company.
State any three purposes other than 'issue of bonus shares' for which securities premium can be utilized.
The amount of securities premium can be utilised for the following purposes:
1) For writing-off the preliminary expenses of the company.
2) For writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.
3) For paying up the premium payable on redemption of redeemable preference shares or debentures of the company.
Alfa Ltd. invited applications for issuing 75,000 equity shares of Rs 10 each. The amount was payable as follows:
On application and allotment Rs 4 per share. On first call Rs 3 per share. On second and final call balance.
Application for 1,00,000 shares were received. Shares were allotted to all the applicants on pro-rata basis and excess money received with applications was transferred towards sums due on first call. Vibha who was allotted 750 shares failed to pay the first call. Her shares were immediately forfeited. Afterwards, the second call was made. The amount due on second call was also received except on 1000 shares, applied by Monika. Her shares were also forfeited. All the forfeited shares were re-issued to Mohit for Rs 9,000 as fully paid up.
Pass necessary journal entries in the books of Alfa Ltd. for the above transactions.
Working Note:
Calculation of amount not received on first call:
Shares applied by Vibha:
(1,00,000/75,000)* 750 = 1,000 shares
Amount received on 1,000 shares @ Rs 4 each = 4000 Rs
Amount transferred to share capital a/c (750*4) = 3000 Rs
Excess application and allotment money received = 1000 Rs
Amount due on first call @ Rs 3 each: 2250 Rs
Amount not received on first call = 1,250 Rs (2250-1000)
Calculation of amount not received on second call:
Shares allotted to Monika = (75,000/1,00,000)* 1000 = 750 shares
Amount not received on second call = Rs 2250 (750*3)
Jeevan Dhara Ltd. invited applications for issuing 1,20,000 equity shares of Rs 10 each at a premium of Rs 2 per share. The amount was payable as follows:
On application Rs 2 per share.
On allotment Rs 5 per share (including premium)
On first and final call balance.
Applications for 1,50,000 share were received. Shares were allotted to all the applicants on pro-rata basis. Excess money received on applications was adjusted towards sums due on allotment. All calls were made. Manu who has applied for 3,000 share failed to pay the amount due on allotment and first and final call. Madhur who was allotted 2,400 shares failed to pay the first and final call. Shares of both Manu and Madhur were forfeited. The forfeited shares were re-issued at Rs 9 per share as fully paid up.
Pass necessary journal entries for the above transactions in the books of Jeevan Dhara Ltd.
Working Note:
Calculation of amount received on allotment, first and final call
Shares allotted to Manu = (1,20,000/1,50,000)* 3000 = 2400 shares
Amount received on 3000 shares of Rs 2 each = Rs 6000
Amount transferred to share capital a/c = 2400*2 = Rs 4800
Excess money received on application = Rs 1200
Amount due on allotment @ Rs 5 each = 12000 i.e. (7200+4800)
Amount not received on securities premium= 4,800
Amount not received on allotment = Rs 6000 i.e. (7200-1200)
Amount not received on first and final call = 12000 i.e. (2400*5)
Calculation of amount not received from Madhur:
Amount not received on first and final call = 12000 i.e. (2400*5)
What is the maximum amount of discount at which forfeited shares can be re-issued?
Forfeited shares can be reissued as fully paid at a par, premium or discount. In this, it may be noted that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue.
Give any one purpose for which the amount received as 'Securities Premium' may be utilised.
The amount received as securities premium can be utilised to write-off preliminary expenses of the company and to write-off the commission paid, or discount allowed on any of the shares or debentures of the company.
Pass necessary journal entries for the following transactions in the books of Rajan Ltd.
Rajan Ltd. purchased machinery of Rs 7,20,000 from Kundan Ltd. The payment was made to Kundan Ltd. by issue of equity shares of Rs 100 each at 10% discount.
XYZ Ltd. invited applications for 40,000 equity shares of Rs 100 each at a discount of 6%. The amount was payable as follows:
On Application and Allotment Rs 90 per share. On First and Final call the balance amount. Application for 60,000 shares were received. Applications for 10,000 shares were rejected and shares were allotted on pro-rata basis to remaining applicants. Excess application money received on application and allotment was adjusted towards sums due on first and final call. The calls were made. A shareholder, who applied for 50 share, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were re-issued at Rs 97 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of XYZ Ltd.
Important Note: As the shareholder has already paid excess amount than required on first and final call as he has applied for, this answer cannot proceed further.
Calculation of excess amount received
Amount received = 50*90=4500
Less amount to be received = 40*90=3600
Excess amount received= 900 Rs
Amount due on first and final call = 40*4 = Rs 160.
As he has already paid amount of Rs 900 in excess at the time of application and allotment, forfeiture is not possible in this case.
Thus, this question has incomplete or wrong information, hence, cannot be solved fully.
Calculation of total amount to be refunded.
Amount paid by 50,000 shares = 45, 00, 000
Less amount to be paid = 36, 00, 000
Excess application money received = 9,00,000
Less amount due on first and final call = 1, 60,000
Amount refunded through bank = 7,40,000
Add amount to be refunded = 9,00,000
Total =16,40,000
AB Ltd. invited applications for issuing 75,000 equity shares of Rs 100 each at a premium of Rs 30 per share. The amount way payable as follows:
On Application and Allotment Rs 85 per share (including premium)On First and Final call the balance Amount Applications for 1,27,500 shares were received. Applications for 27,500 shares were rejected and share were allotted on pro-rata basis to the remaining applicants. Excess money received on application and allotment was adjusted towards sums due to first and final call. The calls were made. A shareholder, who applied for 1,000 shares, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were reissued at Rs 150 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of AB Ltd.
Those who applied for 100000 shares are allotted 75,000 shares
Those who applied for 1000 shares are allotted 75,000*1,000/1,00,000 =750 shares
Shares application and allotment received on 1,000 shares of Rs 85 each = Rs 85,000
Shares allotted = 750*85 = 63,750 Rs
Excess application and allotment money received = Rs 21,250
Share first and final call due on 750 shares of Rs 45 each = Rs 33,750
Excess application and allotment money received = 21,250 Rs
Share first and final call not received = Rs 12,500 ( 33,750-21,250)
Therefore share first and final call received = 12,37,500 (12,50,000-12,500)
What is meant by Securities Premium?
When shares are issued at an amount more than the nominal value or par value, it is called shares issued at premium. The premium amount thus received is credited to a separate account called ‘Securities Premium Account’ and is shown on the liabilities side of the company’s balance sheet under the head ‘Reserves and Surpluses’.
What rate of interest the company pays on calls - in advance if, it has not prepared its own Articles of Association?
If a company has not prepared its own Article of Association, then it has to pay interest on Calls-in-Advance at a rate not exceeding 6% which is prescribed in the Table A of the Companies Act of 1956.
Madhav Ltd. issued fully paid equity shares of Rs. 80 each at a discount of Rs. 5 per share for the purchase of a running business from Gupta Bros. for a sum of Rs. 15,00,000.
The assets and liabilities consisted of the following:
Plant Rs. 5,00,000; Trucks Rs. 7,00,000; Stock Rs. 3,00,000; Machinery Rs. 6,00,000 and Sundry Creditors Rs. 5,00,000.
You are required to pass necessary journal entries for the above transactions in the books of Madhav Ltd.
Working Note:
Calculation of Number of Equity Shares Issued:
Purchase consideration = 15,00,000
Number of equity shares to be issued = 15,00,000/(80-5)
=15,00,000/75 = 20,000 equity shares
Sponsor Area
Jain Ltd. purchased Building for Rs 10,00,000 from Gupta Ltd. 10% of the payable amount was paid by a cheque drawn in favour of Gupta Ltd. The balance was paid by issue of Equity Shares of Rs 10 each at a discount of 10%.
Pass necessary Journal Entries in the books of Jain Ltd.
|
Date |
Particulars |
LF |
Debit (Rs) |
Credit (Rs) |
|
|
Building a/c Dr To Gupta Ltd a/c To bank a/c (being building purchased from Gupta Ltd, Rs 1,00,000 paid by cheque and balance by equity share) |
|
10,00,000
9,00,000 1,00,000 |
9,00,000 1,00,000
10,00,000 |
|
Gupta Ltd a/c Dr Discount on issue of share a/c Dr To Equity share capital a/c (Being 100000 shares of Rs 10 each issued at 10% discount)
|
Shyam Ltd. invited applications for issuing 80,000 Equity Shares of Rs 10 each at a premium of Rs 40 per share. The amount was payable as follows:
On Application Rs 35 per share (including Rs 30 Premium)
On Allotment Rs 8 per share (including Rs 4 Premium)
On First and Final Call - Balance
Applications for 77,000 shares were received. Shares were allotted to all the applicants. Sundaram to whom 7,000 shares were allotted failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwards, the first and final call was made. Satyam the holder of 500 shares failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares 1,000 shares were re-issued at Rs 50 per share fully paid up. The re-issued shares included all the shares of Satyam.
Pass necessary Journal Entries for the above transactions in the books of Shyam Ltd.
|
Book of Shaym Ltd. Journal |
|||||
|
Date |
Particulars |
|
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
Bank A/c To Share Application (Share Application received for 77,000 shares at Rs 35 per share)
Share Application A/c To Equity Share Capital A/c To Securities Premium A/c (Share Application of 77,000 shares transferred to equity share capital and securities premium)
Share Allotment A/c To Equity Share Capital A/c To Securities Premium A/c (Share Allotment due on 77,000 shares)
Bank A/c Calls-in-Arrears A/c To Share Allotment A/c (Share allotment received from all allotted shares except 7,000 shares)
Equity Share Capital A/c Securities Premium A/c To Share Forfeiture A/c To Calls-in-Arrears A/c (7,000 shares Rs 9 called-up forfeited for the non-payment of allotment)
Share First and Final Call A/c To Equity Share Capital A/c To Securities Premium A/c (Share first and final call due on 70,000 shares)
Bank A/c Calls in Arrears A/c To Share First and Final Call A/c (Share First and Final Call received on all shares except 500 shares)
Equity Share Capital A/c Securities Premium A/c To Share Forfeiture A/c To Calls in Arrears A/c (500 Shares forfeited for the no non-payment of First and Final Call)
Bank A/c To Equity Share Capital A/c To Securities Premium A/c (1,000 shares of Rs 10 each re-issued at premium of Rs 40 per share)
Share Forfeiture A/c To Capital Reserve A/c (Share forfeiture of 1,000 shares transferred to Capital Reserve)
|
Dr.
Dr.
Dr. Dr.
Dr. Dr.
Dr.
Dr. Dr.
Dr. Dr.
Dr.
Dr. |
|
26,95,000
26,95,000
6,16,000
5,60,000 56,000
63,000 28,000
4,90,000
486,500 3,500
5,000 3,000
50,000
7,000 |
26,95,000
3,85,000 23,10,000
3,08,000 3,08,000
6,16,000
35,000 56,000
70,000 4,20,000
4,90,000
4,500 3,500
10,000 40,000
7,000 |
Working Note:
Satyam shares:
Share forfeiture = Rs 9 per share
Share forfeiture on reissue = 0
Transfer to capital reserve: 500*9=4500 Rs.
Sundaram:
Share forfeiture = Rs 5 per share
Share forfeiture on reissue = 0
Transfer to Capital Reserve: 500*5= 2500
Total amount transferred to capital reserve = 4500+2500= Rs 7000
Y Ltd. purchased furniture costing Rs. 1,35,000 from A. B. Ltd. The payment was made by issue of Equity Shares of Rs. 10 each at a discount of Rs. 1 per share. Pass necessary Journal entries in the books of Y Ltd.
Journal Entries
|
Particulars |
LF |
Debit |
Credit |
|
Furniture a/c Dr To A.B Ltd (Being furniture purchased from A.B Ltd)
|
|
1,35,000
15,000 |
1,35,000
|
|
A.B Ltd a/c Dr Discount on issue of shares a/c Dr To Equity share capital a/c (Being issue of15000 fully paid equity shares of Rs 10 each at a discount Rs 1 per share.)
|
Working note: Number of equity shares to be issued=135000/9 (Price of a share after 1 Rs discount) = 15000 shares.
X Ltd. issued 40,000 Equity Shares of Rs. 10 each at a premium of Rs. 2.50 per share. The amount was payable as follows:
On application – Rs. 2 per share
On allotment – Rs. 4.50 per share (including premium)
and on call – Rs. 6 per share
Owing to heavy subscription the allotment was made on pro-rata basis as follows:
(a) Applicants for 20,000 shares were allotted 10,000 shares.
(b) Applicants for 56,000 shares were allotted 14,000 shares.
(c) Applicants for 48,000 shares were allotted 16,000 shares.
It was decided that excess amount received on applications would be utilized on allotment and the surplus would be refunded.
Ram, to whom 1,000 shares were allotted, who belong to category (a), failed to pay allotment money. His shares were forfeited after the call.
Pass the necessary Journal entries in the books of X Ltd. for the above transactions.
Date | Particulars | LF | Debit (Rs) | Credit (Rs) |
| Bank A/c Dr
To Equity Share Application A/c
(Being application money received)
|
| 248000
248000
180000
30500
30500
2500
240000
234000
234000 6000
10000
2500
|
248000
80000
147000
21000
80000
100000
30500
33000
234000
240000
4000
2500
6000
4000 |
Equity share application A/c Dr
To Equity share capital A/c
To Equity share Allotment A/c
To Bank A/c
(Being application money transferred)
| ||||
Equity Share Allotment A/c Dr
To Equity Share Capital A/c
To Securities Premium A/c
(Being Allotment money due)
| ||||
Bank A/c Dr
To Equity Share Allotment A/c
( being allotment money received)
Or
Bank A/c Dr
Calls in Arrear A/c Dr
To Equity Share Allotment A/c
( being allotment money received)
| ||||
Equity Share First & Final Call A/c Dr To Equity Share Capital A/c
(Being First & Final Call money due)
| ||||
Bank A/c Dr
To Equity Share First & Final Call A/c OR
Bank A/c Dr
Calls in Arrears A/c Dr
To Equity Share First & Final Call A/c
(Being First & Final Call money received)
| ||||
Securities Premium A/c Dr
To Forfeited Share A/c
To Equity Share Allotment A/c
To Equity Share First & Final Call A/c
OR
Equity Share Capital A/c Dr
Securities Premium A/c Dr
To Forfeited Share A/c
To Calls in Arrears A/c
(Being 1000 shares forfeited) |
Working note:
1) Analysis Table
Share applied (Rs) | Shares allotted (Rs) | Application money received (Rs) | Share application money transferred to share capital a/c (Rs) | Excess application money received (Rs) | Share allotment due (Rs) | Share allotment received (Rs) | Refunded (Rs) |
20000 56000 48000 | 10000 14000 16000 | 40000 112000 96000 | 20000 28000 32000 | 20000 84000 64000 | 45000 63000 72000 | 25000
8000 |
21000 |
124000 | 40000 | 248000 | 80000 | 168000 | 180000 | 33000 | 21000 |
2) Calculation of Calls in arrears on allotment:
Category (a) Applicants of 20,000 shares were allotted 10,000 shares
Ram was allotted 1000 shares, He applied for : (1000 x 20000) / 10000 = 2000 shares
Calls in arrear (1000 x 4.5 ) = 4,500
Less: Already received (1000 x 2) = 2,000
= Rs 2500
Give Journal entries to record the following transactions of forfeiture and re-issue of shares and open share forfeited account in the books of the respective companies.
(i) C Ltd. forfeited 1000 shares of Rs. 100 each issued at a discount of 8% on these shares the first call of Rs. 30 per share was not received and the final call of Rs. 20 per share was yet to be called. These shares were subsequently re-issued at Rs. 70 per share Rs. 80 paid up.
(ii) L Ltd. forfeited 470 Equity Shares of Rs. 10 each issued at a premium of Rs. 5 per share for non-payment of allotment money of Rs. 8 per share (including share premium Rs. 5 per share) and the first and final call of Rs. 5 per share. Out of these 60 Equity Shares were subsequently re-issued at Rs. 14 per share.
|
Date |
Particulars |
LF |
Debit (Rs) |
Credit (Rs) |
|
|
Share Capital A/c (1000 x 80) Dr
To Forfeited Share A/c (1000 x 42)
To Discount on Issue of Share A/c (1000 x 8)
To Share First Call A/c (1000 x 30 ) / Calls in Arrears A/c
(Being 1000 Shares Forfeited due to non payment of first call)
|
|
80000
70000
8000
2000
40000
|
42000
8000
30000
|
|
Bank A/c 1000 x 70) Dr
Discount on Issue of Share A/c Dr
Forfeited Share A/c Dr
To Share Capital A/c (1000 x 80)
(Being 1000 shares re – issued as Rs. 80 called up at Rs. 70 per share)
|
||||
|
Forfeited Share A/c Dr
To Capital Reserve A/c
(Being the profit on re- issued shares transferred to Capital Reserve A/c) |
Forfeited share Account
|
Particulars |
Amount |
Particulars |
Amount |
|
To share capital a/c
To capital reserve |
2000
40000
|
By share capital a/c |
42000
|
|
42000 |
42000
|
(ii)
|
Date |
Particulars |
Lf |
Debit (Rs) |
Credit (Rs) |
|
|
Equity Share Capital A/c (470 x 10) Dr
Securities Premium A/c (470 x 5) Dr
To Forfeited Share A/c (470 x 2)
To Equity Share Allotment A/c (470 x 8)
To Equity Share First & Final Call A/c (470 x 5)
OR
Equity Share Capital A/c (470 x 10) Dr
Securities Premium A/c (470 x 5) Dr
To Forfeited Share A/c (470 x 2)
To Calls in Arrears A/c
(Being 470 shares forfeited)
|
|
4700
2350
4700
2350
840
120 |
940
470
2350
940
6110
600
240
120 |
|
Bank A/c (60 x 14 ) Dr
To Equity Share Capital A/c (60 x 10) To Security Premium A/c (60 x 4)
(Being 60 shares re issued @ of Rs. 14 per share)
|
||||
|
Forfeited Shares A/c Dr
To Capital Reserve A/c
(Being the profit on re-issued shares transferred to capital reserve A/c) |
Forfeited shares account
|
Particulars |
Rs |
Particulars |
Rs |
|
To capital Reserve a/c
To balance c/d |
120
820 |
By share capital a/c |
940 |
|
|
940 |
|
940 |
Note: Amount of Forfeited shares transferred to capital reserve A/c = 940 x 60 / 470 = Rs. 120
To provide employment to the youth and to develop the Naxal affected backward areas of Chhattisgarh. X Ltd. decided to set-up a power plant. For raising funds the company decided to issue 7,50,000 equity shares of ₹10 each at a premium of 50%. The whole amount was payable on application. Applications for 20,00,000 shares were received. Applications for 50,000 shares were rejected and shares were allotted to the remaining applicants on pro-rata basis.
Pass necessary journal entries for the above transactions in the books of the company and identify any two values which X Ltd. wants to propagate.
KS Ltd invited application for issuing 1,60,000 equity shares of ₹ 10 each at a premium of 6 per share. The amount was payable as follows;
On Application ₹ 4 per share (including premium ₹ 1 per share)
On Allotment ₹ 6 per share (including premium ₹3 per share)
On First and Final Call – Balance
Application for 3,20,000 shares were received. Applications for 80,000 share were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with application was adjusted towards sums due on allotment. Jain holding 800 shares failed to pay the allotment money his shares were forfeited immediately after allotment. Afterwards, the final call was made. Gupta who has applied for 1200 shares failed to pay the final call. These shares were forfeited. Out of the forfeited shares 1000 shares were re-issued at 8 per share fully paid up. The re-issued shares included all the forfeited shares of Jain Pass necessary journal entries for the above transactions in the books of KS Ltd
Z. Ltd forfeited 1,000 equity shares of ₹ 10 each for the non-payment of the first call of ₹ 2 per share. The final call of ₹ 3 per share was yet to be made.
Calculate the maximum amount of discount at which these shares can be reissued.
The maximum amount of discount at which the shares can be re-issued is (3+2 = 5 x 1000 = 5000) ₹ 5,000 (i.e. the credit balance in Share Forfeiture Account)
Ganesh Ltd. is registered with an authorised capital of ₹10,00,00,000 divided into equity shares of ₹ 10 each. Subscribed and fully paid up capital of the company was ₹ 6,00,00,000. For providing employment to the local youth for the development of the tribal areas of Arunachal Pradesh the company decided to Set up a hydro power plants there. The company also decided to Open skill development centres in Itnaagar, pasighat and Tawang. To meet its new financial requirements, the company decided to issue 1,00,000 equity shares of ₹ 10 each and 1,00,000, 9% debentures of ₹ 100 each. The debentures were redeemable after five years at par. The issue of shares and debentures was fully subscribed. A shareholder holding 2,000 shares failed to pay the final call of ₹ 2 per share.
Show the share capital in the Balance Sheet of the company as per the provisions of Schedule III of the companies Act, 2013; also identify any two values that the company wishes to propagate.
JJK Ltd invited application or issuing 150,000 equity shares of 10 each at par. The amount was payable as follows:
On Application: ₹ 2 per share
On Allotment : ₹ 4 per share
On First and Final Call: Balance Amount
The issue was oversubscribed three times. Applications for 30% shares were rejected and money refunded. Allotment was made to the remaining applicants as follows:
Category No of Shares Applied No of shares Allotted
I 80,000 40,000
II 25,000 10,000
Excess money paid by the applicants who were allotted shares was adjusted towards the sums due on allotment.
Deepak, a shareholder belonging the Category I, who had applied for 1,000 shares, failed to pay the allotment money. Raju, a shareholder holding 100 shares, also failed to pay the allotment money. Raju belonged to category II. Shares of both Deepak and Raju were forfeited immediately after allotment. Afterwards, first and final call was made and was duly received. The forfeited shares of Deepak and Raju were reissued at 11 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of the company.
Sponsor Area
Sponsor Area
