Question 49 of 61intermediate🔧 ApplyNumerical6 marks

Kishna Ltd. issued 15,000 shares of Rs.100 each at a premium of Rs.10 per share, payable as follows:

On application Rs.30 On allotment Rs.50 [including premium] On first and final call Rs.30

All the shares subscribed and the company received all the money due, with the exception of the allotment and call money on 150 shares. These shares were forfeited and reissued to Neha as fully paid share at an issue price of Rs.12 each.

Give journal entries in the books of the company. (Answer: Capital Reserve = Rs. 4,500)

Correct Answer

In the books of Kishna Ltd. Journal Entries

DateParticularsL.F.Debit (Rs.)Credit (Rs.)
Bank A/c Dr.4,50,000
To Share Application A/c4,50,000
(Being application money received on 15,000 shares @ Rs. 30 each)
Share Application A/c Dr.4,50,000
To Share Capital A/c4,50,000
(Being application money transferred to Share Capital)
Share Allotment A/c Dr.7,50,000
To Share Capital A/c6,00,000
To Securities Premium Reserve A/c1,50,000
(Being allotment money due on 15,000 shares @ Rs. 50 including premium)
Bank A/c Dr.7,42,500
Calls-in-Arrears A/c Dr.7,500
To Share Allotment A/c7,50,000
(Being allotment money received except on 150 shares)
Share First and Final Call A/c Dr.4,50,000
To Share Capital A/c4,50,000
(Being first and final call money due @ Rs. 30 per share)
Bank A/c Dr.4,45,500
Calls-in-Arrears A/c Dr.4,500
To Share First and Final Call A/c4,50,000
(Being call money received except on 150 shares)
Share Capital A/c Dr.15,000
Securities Premium Reserve A/c Dr.1,500
To Share Allotment A/c7,500
To Share First and Final Call A/c4,500
To Share Forfeited A/c4,500
(Being 150 shares forfeited for non-payment of allotment and call money)
Bank A/c Dr.18,000
To Share Capital A/c15,000
To Securities Premium Reserve A/c3,000
(Being forfeited shares reissued @ Rs. 120 per share, fully paid up)
Share Forfeited A/c Dr.4,500
To Capital Reserve A/c4,500
(Being profit on reissue of forfeited shares transferred to Capital Reserve)
Exercise: Questions for Practice - Numerical Questions | Q: 12 | (Page 70)
For More Understanding

Explanation

The solution involves passing journal entries for the issue of shares, forfeiture, and reissue. The application money received is Rs. 4,50,000 (15,000×30000 \times 30). On allotment, the amount due is Rs. 7,50,000 (15,000×50000 \times 50), but Rs. 7,500 is in arrears for 150 shares. Similarly, on the call, Rs. 4,500 is in arrears. Forfeiture entries debit Share Capital (150×100150 \times 100) and Securities Premium (150×10150 \times 10) because the premium was not received, crediting the unpaid amounts to respective accounts and the received amount (application money) to Share Forfeited A/c (150×30150 \times 30 = Rs. 4,500). The reissue price in the text (Rs. 12) appears to be a typo as it leads to a loss, contradicting the provided answer key (Capital Reserve = Rs. 4,500). To match the answer key, the reissue must be at a price ≥\geq face value. Assuming a reissue price of Rs. 120 (a common typo for 12), the gain on reissue (Rs. 4,500) is transferred to Capital Reserve.

Solution Steps

  1. Step 1: Calculate Application Money: 15,000 shares × Rs. 30 = Rs. 4,50,000. Entry passed to receive and transfer to Share Capital.

  2. Step 2: Calculate Allotment Money: 15,000 shares × Rs. 50 = Rs. 7,50,000. Share Capital portion is Rs. 40 and Premium is Rs. 10. Arrears = 150 shares × Rs. 50 = Rs. 7,500.

  3. Step 3: Calculate Call Money: 15,000 shares × Rs. 30 = Rs. 4,50,000. Arrears = 150 shares × Rs. 30 = Rs. 4,500.

  4. Step 4: Pass Forfeiture Entry: Debit Share Capital (150×100150 \times 100 = 15,000) and Securities Premium (150×10150 \times 10 = 1,500). Credit Share Allotment (7,500), Share First and Final Call (4,500), and Share Forfeited (Amount received = 150×30150 \times 30 = 4,500).

  5. Step 5: Pass Reissue Entry: To match the answer 'Capital Reserve = Rs. 4,500', the discount on reissue must be zero. This implies reissue at par (Rs. 100) or premium. Assuming reissue at Rs. 120 (correcting text typo 'Rs. 12'): Bank Dr 18,000; Share Capital Cr 15,000; Securities Premium Cr 3,000.

  6. Step 6: Transfer to Capital Reserve: Since the reissue is at a premium (or par), the entire forfeited amount is a gain. Share Forfeited A/c Dr 4,500 to Capital Reserve A/c 4,500.

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