Question

Alfa Ltd. invited applications for issuing 75,000 equity shares of Rs 10 each. The amount was payable as follows:

$\begin{array}{cc}\text{On Application and Allotment}& \text{Rs 4 per share}\\ \text{On First Call}& \text{Rs 3 per share}\\ \text{On Second and Final Call}& \text{Balance}\end{array}$

Applications for 1,00,000 shares were received. Shares were allotted to all the applicants on pro-rata basis and excess money received with applications was transferred towards sums due on first call. Vibha who was allotted 750 shares failed to pay the first call. Her shares were immediately forfeited. Afterwards the second call was made.The amount due on second call was also received except on 1,000 shares applied by Monika. Her shares were also forfeited. All the forfeited shares were re-issued to Mohit for Rs 9,000 as fully paid up.

(a) Pass necessary journal entries in the books of Alfa LTd. for the above transactions.

(b) Which value has been followed by the Company while making allotment of shares?

Answer 1

ALFA LTD.
JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ & \text{Bank A/c}& \text{Dr.}& & 4,00,000& \\ & \text{To Equity Share Application and Allotment A/c}& & & & 4,00,000\\ & \text{(Application and Allotment money received}& & & & \\ & \text{on 1,00,000 shares @}\text{Rs 4 per share)}& & & & \\ & \text{Equity Share Application and Allotment A/c}& \text{Dr.}& & 4,00,000& \\ & \text{To Equity Share Capital A/c}& & & & 3,00,000\\ & \text{To Calls in Advance A/c}& & & & 1,00,000\\ & \text{(Allotment made)}& & & & \\ & {\text{Bank A/c}}^{\left(1\right)}& \text{Dr.}& & 1,23,750& \\ & \text{Calls in Advance A/c}& \text{Dr.}& & 1,00,000& \\ & \text{Calls in Arrears A/c}& \text{Dr.}& & 1,250& \\ & \text{To Equity Share First Call A/c}& & & & 2,23,750\\ & \text{(First call money received,except on 750 shares)}& & & & \\ & \text{Equity Share First Call A/c}& \text{Dr.}& & 2,25,000& \\ & \text{To Equity Share Capital A/c}& & & & 2,25,000\\ & \text{(First call due on 75,000 shares at Rs 3 per share)}& & & & \\ & \text{Equity Share Capital A/c}& \text{Dr.}& & 5,250& \\ & \text{To Equity Share First Call A/c}& & & & 1,250\\ & \text{To Share Forfeiture A/c}& & & & 4,000\\ & \text{(The forfeiture of 750 shares of Vibha,Share}& & & & \\ & \text{Capital A/c debited @ Rs 7 per share called up)}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 2,20,500& \\ & \text{Calls in Arrears A/c}& \text{Dr.}& & 2,250& \\ & \text{To Equity Share Second and Final call A/c}& & & & 2,22,750\\ & \text{(Second and Final call money received on 73,500 shares)}& & & & \\ & \text{Equity Share Second and Final Call A/c}& \text{Dr.}& & 2,22,750& \\ & \text{To Equity Share Capital A/c}& & & & 2,22,750\\ & \text{(Second and Final call money due on 74,250}& & & & \\ & \text{shares at Rs 3 per share)}& & & & \\ & \text{Equity Share Capital A/c}& \text{Dr.}& & 7,500& \\ & \text{To Equity Share Second and Final call A/c}& & & & 2,250\\ & \text{To Share Forfeiture A/c}& & & & 5,250\\ & \text{(The Forfeiture of 750 shares of Monika)}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 9,000& \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 6,000& \\ & \text{To Equity Share Capital A/c}& & & & 15,000\\ & \text{(Re-issue of 1,500 shares)}& & & & \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 3,250& \\ & \text{To Capital Reserve A/c}& & & & 3,250\\ & \text{(Balance of Share Forfeiture A/c transferred to Capital Reserve)}& & & & \end{array}$

(1)
(A) Excess amount received from Vibha on application & allotment :

Vibha has been allotted 750 shares. She must have applied for more shares.

If shares allotted were 75,000 shares applied for were $=\frac{1,00,000}{75,000}\times 750=1,000$ shares

Excess application money received from Vibha = 1,000 Shares - 750 Shares

= 250 shares $\times \text{Rs 4=Rs 1,000}$

$\begin{array}{ccc}& & \\ \text{(B) Amount due from Vibha on first call :}& & \\ \text{750 shares}\times \text{Rs 3}& =& 2,250\\ \text{Less : Excess received from Vibha on application and allotment}& & 1,000\\ \text{Net Amount due from Vibha on First Call which has not been received}& & \overline{\underset{–}{1,250}}\end{array}$

$\begin{array}{ccc}& & \text{Rs.}\\ \text{(C) Total amount due on First Call 75,000 shares}\times \text{Rs 3}& =& 2,25,000\\ \text{Less: Excess amount received on application and allotment}& =& 1,00,000\\ \text{Balance Due}& =& \overline{1,25,000}\\ \text{Less: Amount not received from Vibha on First Call}& =& 1,250\\ \text{Net amount received on first call in cash}& =& \overline{\underset{–}{1,23,750}}\end{array}$

(2) Value of equality has been followed by the Company by making pro-rata allotments of shares among all the applicants.