Question

(a) Ravi Ltd. forfeited 800 shares of Rs 10 each, Rs 7.50 paid, for non-payment of Final Call of Rs 2.50 per share. Out of these, 600 shares were re-issued as fully paid up in such a way that Rs 2,100 were transferred to capital reserve. Pass necessary journal entries.

(b) X Ltd. forfeited 800 shares of Rs 10 each, Rs 7.50 called-up, for non-payment of Final Call of Rs 2.50 per share. Out of these, 600 shares were re-issued for Rs 6 per share as Rs 7.50 paid up. Pass necessary journal entries.

(c) 400 shares of Rs 10, on which Rs 8 has been called and Rs 6 has been paid, are forfeited. Out of these, 300 are re-issued for Rs 7 as fully paid. Pass necessary journal entries.

Answer 1

(a) JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ & \text{Share Capital A/c}(800\times \text{Rs 10})& \text{Dr.}& & 8,000& \\ & \text{To Share First Call}(800\times \text{Rs 2.50})& & & & 2,000\\ & \text{To Share Forfeiture A/c}(800\times \text{Rs 7.50})& & & & 6,000\\ & \text{(Forfeiture of 800 shares)}& & & & \\ & {\text{Bank A/c}}^{\left(1\right)}& \text{Dr.}& & 3,600& \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 2,400& \\ & \text{To Share Capital A/c}& & & & 6,000\\ & \text{(Re-issue of 600 shares @ Rs 6 per share as fully paid up)}& & & & \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 2,100& \\ & \text{To Capital Reserve A/c}& & & & 2,100\\ & \text{(Profit on 600 re-issued shares transferred to Capital Reserve )}& & & & \end{array}$

Note (1)

$\begin{array}{ccc}\text{Profit on 800 shares = Rs 6,000}& & \text{Rs.}\\ \therefore \text{Profit on 600 shares =}\frac{6,000}{800}\times 600& =& 4,500\\ \text{Less: Transferred to Capital Reserve}& =& 2,100\\ \text{Loss on Re-issue}& =& \overline{\underset{–}{\underset{–}{2,400}}}\end{array}$

Per share loss on re-issue =$\frac{2,400}{600}=Rs4$ per share.

Hence, Shares are re-issued at Rs 10 - Rs 4 = Rs 6 per share.

(b) JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ & \text{Share Capital A/c}(800\times \text{Rs 7.50})& \text{Dr.}& & 6,000& \\ & \text{To Share First Call}(800\times \text{Rs 2.50})& & & & 2,000\\ & \text{To Share Forfeiture A/c}(800\times \text{Rs 5})& & & & 4,000\\ & \text{(Forfeiture of 800 shares)}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 3,600& \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 900& \\ & \text{To Share Capital A/c}& & & & 4,500\\ & \text{(Re-issue of 600 shares @ Rs 6 per share as rS 7.50 paid up)}& & & & \\ & {\text{Share Forfeiture A/c}}^{\left(2\right)}& \text{Dr.}& & 2,100& \\ & \text{To Capital Reserve A/c}& & & & 2,100\\ & \text{(Profit on 600 re-issued shares transferred to Capital Reserve )}& & & & \end{array}$

Note (2)

$\begin{array}{ccc}\text{Profit on 800 shares = Rs 4,000}& & \text{Rs.}\\ \therefore \text{Profit on 600 shares =}Rs4,000\times \frac{600}{800}& =& 3,000\\ \text{Loss on Re-issue of 600 shares @ Rs 1.50 each}& =& 900\\ & & \overline{\underset{–}{2,100}}\end{array}$

(c) JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ & \text{Share Capital A/c}& \text{Dr.}& & 3,200& \\ & \text{To Calls in Arrears A/c}& & & & 800\\ & \text{To Share Forfeiture A/c}& & & & 2,400\\ & \text{(Forfeiture of 400 shares)}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 2,100& \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 900& \\ & \text{To Share Capital A/c}& & & & 3,000\\ & \text{(Re-issue of 300 shares @ Rs 6 per share as Rs 7.50 paid up)}& & & & \\ & {\text{Share Forfeiture A/c}}^{\left(3\right)}& \text{Dr.}& & 900& \\ & \text{To Capital Reserve A/c}& & & & 900\\ & \text{(Profit on 300 re-issued shares transferred to Capital Reserve )}& & & & \end{array}$

Note (3)

$\begin{array}{ccc}\text{Profit on 400 shares = Rs 2,400}& & \text{Rs.}\\ \therefore \text{Profit on 300 shares =}Rs2,400\times \frac{300}{400}& =& 1,800\\ \text{Loss on Re-issue of 300 shares @ Rs 3 each}& =& 900\\ & & \overline{\underset{–}{900}}\end{array}$