Question 15 of 61intermediate🔧 ApplyNumerical6 marks

Excel Company Limited made an issue of 1,00,000 Equity Shares of Rs.10 each, payable as follows:

On Application Rs.2.50 per share On Allotment Rs.2.50 per share On First and Final Call Rs.5.00 per share

X, the holder of 400 shares did not pay the call money and his shares were forfeited. 200 of the forfeited shares were reissued as fully paid at Rs.8 per share. Draft necessary journal entries and prepare Share Capital and Share Forfeiture accounts in the books of the company.

Correct Answer

Journal Entries in the books of Excel Company Limited:

DateParticularsL.F.Debit Amount (Rs.)Credit Amount (Rs.)
Bank A/c Dr. To Equity Share Application A/c (Application money received on 1,00,000 shares @ Rs.2.50 per share)2,50,0002,50,000
Equity Share Application A/c Dr. To Equity Share Capital A/c (Application money transferred to Share Capital)2,50,0002,50,000
Equity Share Allotment A/c Dr. To Equity Share Capital A/c (Allotment money due on 1,00,000 shares @ Rs.2.50 per share)2,50,0002,50,000
Bank A/c Dr. To Equity Share Allotment A/c (Allotment money received)2,50,0002,50,000
Equity Share First and Final Call A/c Dr. To Equity Share Capital A/c (First and Final Call money due on 1,00,000 shares @ Rs.5 per share)5,00,0005,00,000
Bank A/c Dr. To Equity Share First and Final Call A/c (Call money received on 99,600 shares; X holding 400 shares failed to pay)4,98,0004,98,000
Equity Share Capital A/c Dr. To Share Forfeiture A/c To Equity Share First and Final Call A/c (400 shares forfeited for non-payment of call money)4,0002,000 2,000
Bank A/c Dr. Share Forfeiture A/c Dr. To Equity Share Capital A/c (200 forfeited shares reissued as fully paid at Rs.8 per share)1,600 4002,000
Share Forfeiture A/c Dr. To Capital Reserve A/c (Profit on reissue transferred to Capital Reserve)600600

Share Capital Account:

ParticularsAmount (Rs.)ParticularsAmount (Rs.)
To Share Forfeiture A/c4,000By Share Application A/c2,50,000
To Balance c/d9,98,000By Share Allotment A/c2,50,000
By Share First and Final Call A/c5,00,000
By Bank A/c (reissue)2,000
10,02,00010,02,000

Share Forfeiture Account:

ParticularsAmount (Rs.)ParticularsAmount (Rs.)
To Bank A/c (discount on reissue)400By Share Capital A/c2,000
To Capital Reserve A/c600
To Balance c/d1,000
2,0002,000
Exercise: Do it Yourself | Q: 1 | (Page 58)
For More Understanding

Explanation

This question tests the student's understanding of share issue, forfeiture, and reissue. The key calculations are: (1) Amount forfeited per share = Rs.2.50 + Rs.2.50 = Rs.5, so total forfeited amount = 400 × Rs.5 = Rs.2,000; (2) On reissue of 200 shares at Rs.8, discount = Rs.10 - Rs.8 = Rs.2 per share, total discount = Rs.400; (3) Capital Reserve = Amount forfeited on 200 shares (Rs.1,000) - Discount on reissue (Rs.400) = Rs.600. The balance in Share Forfeiture Account (Rs.1,000) represents forfeiture amount on 200 shares not yet reissued.

Solution Steps

  1. Step 1: Calculate application money received = 1,00,000 × Rs.2.50 = Rs.2,50,000

  2. Step 2: Calculate allotment money due and received = 1,00,000 × Rs.2.50 = Rs.2,50,000

  3. Step 3: Calculate call money due = 1,00,000 × Rs.5 = Rs.5,00,000

  4. Step 4: Calculate call money received = 99,600 × Rs.5 = Rs.4,98,000 (X holding 400 shares failed to pay)

  5. Step 5: Forfeiture entry - Share Capital debited by 400 × Rs.10 = Rs.4,000; Share Forfeiture credited by 400 × Rs.5 = Rs.2,000

  6. Step 6: Reissue entry - Bank debited by 200 × Rs.8 = Rs.1,600; Share Forfeiture debited by 200 × Rs.2 = Rs.400 (discount)

  7. Step 7: Capital Reserve = (200 × Rs.5) - Rs.400 = Rs.1,000 - Rs.400 = Rs.600

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