Question 58 of 61intermediate🔧 ApplyNumerical6 marks

Amit holds 100 shares of Rs.10 each on which he has paid Re.1 per share as application money. Bimal holds 200 shares of Rs.10 each on which he has paid Re.1 and Rs.2 per share as application and allotment money, respectively. Chetan holds 300 shares of Rs.10 each and has paid Re.1 on application, Rs.2 on allotment and Rs.3 for the first call. They all failed to pay their arrears and the second call of Rs.2 per share and the directors, therefore, forfeited their shares. The shares are reissued subsequently for Rs.11 per share as fully paid. Journalise the transactions. (Answer: Capital Reserve = Rs. 2,500)

Correct Answer

JOURNAL ENTRIES

1. Forfeiture of Shares: Share Capital A/c Dr. Rs. 4,800 To Share Forfeiture A/c Rs. 2,500 To Share Allotment A/c Rs. 200 To Share First Call A/c Rs. 900 To Share Second Call A/c Rs. 1,200 (Being 600 shares forfeited for non-payment of allotment, first call and second call)

2. Reissue of Shares: Bank A/c Dr. Rs. 6,600 To Share Capital A/c Rs. 6,000 To Securities Premium A/c Rs. 600 (Being 600 forfeited shares reissued at Rs. 11 per share as fully paid)

3. Transfer to Capital Reserve: Share Forfeiture A/c Dr. Rs. 2,500 To Capital Reserve A/c Rs. 2,500 (Being Share Forfeiture balance transferred to Capital Reserve)

Exercise: Questions for Practice - Numerical Questions | Q: 21 | (Page 73)
For More Understanding

Explanation

This question tests the concept of share forfeiture and reissue. The key is calculating the amount received from each shareholder before forfeiture. Amit paid only application (Re. 1×1001 \times 100 = Rs. 100), Bimal paid application and allotment (Rs. 3×2003 \times 200 = Rs. 600), and Chetan paid application, allotment and first call (Rs. 6×3006 \times 300 = Rs. 1,800). Total Share Forfeiture = Rs. 2,500. Since shares are reissued at Rs. 11 (premium of Rs. 1), there's no loss on reissue, so entire forfeiture amount transfers to Capital Reserve.

Solution Steps

  1. Step 1: Calculate Share Forfeiture Amount - Amit: 100 × Re. 1 = Rs. 100; Bimal: 200 × Rs. 3 = Rs. 600; Chetan: 300 × Rs. 6 = Rs. 1,800; Total = Rs. 2,500

  2. Step 2: Calculate Called-up Capital - Application (Re. 1) + Allotment (Rs. 2) + First Call (Rs. 3) + Second Call (Rs. 2) = Rs. 8 per share; Total = 600 × Rs. 8 = Rs. 4,800

  3. Step 3: Calculate Calls in Arrears - Amit: Rs. 700 (Allotment Rs. 200 + First Call Rs. 300 + Second Call Rs. 200); Bimal: Rs. 1,000 (First Call Rs. 600 + Second Call Rs. 400); Chetan: Rs. 600 (Second Call); Total = Rs. 2,300

  4. Step 4: Pass Forfeiture Entry - Share Capital Dr. Rs. 4,800; Credit Share Forfeiture Rs. 2,500 and respective Call Accounts Rs. 2,300

  5. Step 5: Pass Reissue Entry - Bank Dr. Rs. 6,600 (600 × Rs. 11); Credit Share Capital Rs. 6,000 and Securities Premium Rs. 600

  6. Step 6: Calculate Capital Reserve - Share Forfeiture Balance Rs. 2,500 - Loss on Reissue (Nil) = Rs. 2,500

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