Amisha Ltd. invited applications for 40,000 shares of Rs.100 each at a premium of Rs.20 per share. Amount payable on application Rs.40; on allotment Rs.40 (Including premium): on first call Rs.25 and second and final call Rs.15. Applications were received for 50,000 shares and allotment was made on pro-rata basis. Excess money on application was adjusted against the sums due on allotment.
Rohit to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited after allotment. Ashmita, who applied for 1,000 shares failed to pay the two calls and her shares were forfeited after the second call. Of the shares forfeited, 1,200 shares were sold to Kapil for Rs.85 per share as fully paid, the whole of Rohit’s shares being included.
Record necessary journal entries. (Answer: Capital Reserve = Rs. 48,000 Balance of Share Forfeiture A/c Rs.12,000)
Journal Entries in the Books of Amisha Ltd.
1. Application Money Received: Bank A/c Dr. 20,00,000 To Share Application A/c 20,00,000 (Being application money received for 50,000 shares @ Rs.40)
2. Adjustment of Application Money: Share Application A/c Dr. 20,00,000 To Share Capital A/c 16,00,000 To Share Allotment A/c 4,00,000 (Being application money adjusted for 40,000 shares and excess transferred to allotment)
3. Allotment Money Due: Share Allotment A/c Dr. 16,00,000 To Share Capital A/c 8,00,000 To Securities Premium A/c 8,00,000 (Being allotment money due @ Rs.40 including premium)
4. Allotment Money Received: Bank A/c Dr. 11,82,000 To Share Allotment A/c 11,82,000 (Being allotment money received after adjustments)
Working: Total due Rs.16,00,000 - Excess adjusted Rs.4,00,000 - Rohit's unpaid Rs.18,000 = Rs.11,82,000
5. Forfeiture of Rohit's Shares: Share Capital A/c Dr. 36,000 Securities Premium A/c Dr. 12,000 To Share Allotment A/c 18,000 To Share Forfeiture A/c 30,000 (Being 600 shares forfeited for non-payment of allotment)
Working: Rohit applied for 750 shares, allotted 600. Application paid Rs.30,000. Excess Rs.6,000 adjusted. Allotment unpaid Rs.18,000.
6. First Call Due: Share First Call A/c Dr. 10,00,000 To Share Capital A/c 10,00,000
7. First Call Received: Bank A/c Dr. 9,80,000 To Share First Call A/c 9,80,000 (Less: Ashmita's unpaid Rs.20,000)
8. Second Call Due: Share Second Call A/c Dr. 6,00,000 To Share Capital A/c 6,00,000
9. Second Call Received: Bank A/c Dr. 5,88,000 To Share Second Call A/c 5,88,000 (Less: Ashmita's unpaid Rs.12,000)
10. Forfeiture of Ashmita's Shares: Share Capital A/c Dr. 80,000 To Share First Call A/c 20,000 To Share Second Call A/c 12,000 To Share Forfeiture A/c 48,000 (Being 800 shares forfeited for non-payment of calls)
Working: Ashmita applied for 1,000 shares, allotted 800. Amount received: Application Rs.40,000 + Allotment Rs.24,000 = Rs.64,000. But premium received is not forfeited, so Share Forfeiture = Rs.48,000.
11. Reissue of Shares: Bank A/c Dr. 1,02,000 Share Forfeiture A/c Dr. 18,000 To Share Capital A/c 1,20,000 (Being 1,200 shares reissued @ Rs.85 fully paid)
12. Transfer to Capital Reserve: Share Forfeiture A/c Dr. 48,000 To Capital Reserve A/c 48,000
Capital Reserve Calculation: Rohit's 600 shares: Rs.30,000 - Rs.9,000 = Rs.21,000 Ashmita's 600 shares: Rs.36,000 - Rs.9,000 = Rs.27,000 Total = Rs.48,000
Balance in Share Forfeiture A/c: Rs.12,000 (200 shares × Rs.60)
Explanation
The question involves pro-rata allotment, forfeiture at different stages, and reissue of shares. Key points: (1) For Rohit - forfeited after allotment, premium not received, so Securities Premium is debited in forfeiture entry. (2) For Ashmita - forfeited after second call, premium was already received, so Securities Premium is NOT debited. (3) Share Forfeiture for Rohit = Rs.30,000 (application money received). (4) Share Forfeiture for Ashmita = Rs.48,000 (amount received excluding premium). (5) Reissue discount of Rs.15 per share is debited to Share Forfeiture A/c.
Solution Steps
Step 1: Calculate pro-rata ratio - 40,000/50,000 = 4:5
Step 2: Calculate Rohit's application - Applied 750 shares, paid Rs.30,000; Allotted 600 shares
Step 3: Calculate Rohit's forfeiture - Excess Rs.6,000 adjusted, unpaid allotment Rs.18,000, Share Forfeiture Rs.30,000
Step 4: Calculate Ashmita's application - Applied 1,000 shares, allotted 800 shares
Step 5: Calculate Ashmita's forfeiture - Amount received Rs.64,000, but premium Rs.16,000 already credited, so Share Forfeiture Rs.48,000
Step 6: Pass reissue entry - 1,200 shares @ Rs.85, discount Rs.15 per share
Step 7: Calculate Capital Reserve - Rohit: Rs.30,000 - Rs.9,000 = Rs.21,000; Ashmita: Rs.36,000 - Rs.9,000 = Rs.27,000; Total Rs.48,000
Step 8: Balance in Share Forfeiture - 200 shares × Rs.60 = Rs.12,000