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Face Value and Market Value

AB Ltd. invit...

Question

AB Ltd. invited applications for issuing 75,000 equity shares of Rs 100 each at a premium of Rs 30 per share. The amount way payable as follows:
On Application and Allotment - Rs 85 per share (including premium)
On First and Final call - the balance Amount Applications for 1,27,500 shares were received. Applications for 27,500 shares were rejected and share were allotted on pro-rata basis to the remaining applicants. Excess money received on application and allotment was adjusted towards sums due to first and final call. The calls were made. A shareholder, who applied for 1,000 shares, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were reissued at Rs 150 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of AB Ltd.

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Solution

Those who applied for 1,00,000 shares allotted = $75, 000$ Shares
Those who applied for $1, 000$ shares allotted $= 75, 000 \times \frac{1, 000}{1, 00, 000} = 750$ shares
Share Allotted $(750 \times 85) = R s .63, 750$
Excess Application and allotment money received $= R s .21, 250$
Share First and Final call not received $= R s .12500 (33, 750 - 21250)$
Therefore,share First and final Call received $= R s .12, 37, 500 (12, 50, 000 - 12, 500)$

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