Question

Alfa Limited invited applications for 4,00,000 of its equity shares of Rs.10 each on the following terms.

$\begin{array}{cc}& \\ & \text{(Rs)}\\ \text{Payable on application}& \text{5 per share}\\ \text{Payable on Allotment}& \text{3 per share}\\ \text{Payable on First and Final Call}& \text{2 per share}\end{array}$

Application for 5,00,000 shares were received. It was decided

(a) To refuse allotment to the applicants for 20,000 shares;

(b) To allot in full to applicants for 80,000 shares;

(c) To allot the balance of the available shares pro-rata among the other applicants; and

(d) To utilize excess application money in part as payment of allotment money.

One applicant, whom shares had been allotted on pro-rata basis, did not pay the amount due on allotment and on the call, and his 400 shares were forfeited. The shares were reissued @ Rs.9 per share. Show the journal and prepare cash book to record the above.

Answer 1

$\text{Journal Entries}$
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Amt. (Dr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Share Application A/c}(5,00,000\times 5)& \text{Dr}& & 25,00,000& \\ & \text{To Share Capital A/c}(4,00,000\times 5)& & & & 20,00,000\\ & \text{To Share Allotment A/c}& & & & 5,00,000\\ & \text{(Share application money adjusted)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ii)}& \text{Share Allotment A/c}& \text{Dr}& & 12,00,000& \\ & \text{To Share Capital A/c}& & & & 12,00,000\\ & \text{(Share allotment money transferred to share capital account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iii)}& \text{Share First and Final Call A/c}& \text{Dr}& & 8,00,000& \\ & \text{To Share Capital A/c}& & & & 8,00,000\\ & \text{(Share first and final call money transferred to share capital account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iv)}& \text{Share Capital A/c}& \text{Dr}& & 4,000& \\ & \text{To Share Allotment A/c}& & & & 700\\ & \text{To Share First and Final Call A/c}& & & & 800\\ & \text{To Share Forfeiture A/c}& & & & 2,500\\ & \text{(400 shares forfeited)}& & & & \\ & \underset{–}{}& & & & \\ \text{(v)}& \text{Share Forfeiture A/c}& \text{Dr}& & 400& \\ & \text{To Share Capital A/c}& & & & 400\\ & \text{(Share reissued and loss on issue charged}& & & & \\ & \text{from share forfeiture account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(vi)}& \text{Share Forfeiture A/c}(2,500-400)& \text{Dr}& & 2,100& \\ & \text{To Capital Reserve A/c}& & & & 2,100\\ & \text{(Share forfeiture acoount transferred to}& & & & \\ & \text{capital reserve account)}& & & & \end{array}$

$\text{Dr}\text{Cash Book (Bank Column)}\text{Cr}$
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ & \text{Share}& & & & \text{Shares}& & \\ & \text{Application}& & 25,00,000& & \text{Allotment}& & 1,00,000\\ & (5,00,000\times 5)& & & & & & \\ & \text{Share Allotment}& & & & \text{Balance}& & \\ & \text{(Working note iii)}& & 7,99,300& & \text{c/d}& & 40,02,100\\ & \text{Share First and}& & & & & & \\ & \text{Final Call}& & 7,99,200& & & & \\ & \text{(Working Note iv)}& & & & & & \\ & \text{Share Capital}& & & & & & \\ & (400\times 9)& & 3,600& & & & \\ & & & \underset{–}{\overline{\underset{–}{41,02,100}}}& & & & \underset{–}{\overline{\underset{–}{41,02,100}}}\end{array}$

Working Note :
(i) Calculation of Amount Received on Allotment
$\begin{array}{ccc}& & \\ \text{Money received on application}(5,00,000\times 5)& =& 25,00,000\\ \text{(-) Money transferred to capital}(4,00,000\times 5)& =& \underset{–}{(20,00,000)}\\ & & 5,00,000\\ \text{(-) Money refunded for shares rejected}(20,000\times 5)& & \underset{–}{(1,00,000)}\\ \text{Amount be taken as allotment advance}& & \underset{–}{4,00,000}\end{array}$

(ii) Amount of Arrear on Allotment for 400 shares unpaid
Shares applied = $\frac{4,00,000}{3,20,000}\times 400=500$ shares

$\begin{array}{ccc}& & \\ \text{Money received on application from applicant}(500\times 5)& =& 2,500\\ \text{(-) Money transferred to share capital}(400\times 5)& =& \underset{–}{(2,000)}\\ \text{Taken as allotment advance}& & \underset{–}{\left(500\right)}\\ \text{Amount due on allotment for 400 shares}(400\times 3)& =& 1,200\\ \text{(-) Money received on application as advance}& =& \underset{–}{\left(500\right)}\\ \text{Arrear on 400 shares on allotment}& & \underset{–}{700}\end{array}$

(iii) Calculation for money Received on Allotment
$\begin{array}{ccc}& & \\ \text{Money due on allotment}(4,00,000\times 3)& =& 12,00,000\\ \text{(-)Received as advance on application}& =& \underset{–}{(4,00,000)}\\ \text{Money to be received on allotment}& & 8,00,000\\ \text{(-) Arrear of 400 shares to be forfeited}& & \left(700\right)\\ \text{Net amount received on allotment}& & \underset{–}{\overline{7,99,300}}\end{array}$

(iv) Calculation of money Received on First Call
$\begin{array}{ccc}& & \\ \text{Money due}(4,00,000\times 2)& =& 8,00,000\\ \text{(-) Amount of arrear}400\times 2& =& \left(800\right)\\ \text{Net amount received on final call}& & \overline{\underset{–}{7,99,200}}\end{array}$