Question

Bhagwati Ltd. invited applications for issuing 2,00,000 equity shares of Rs 10 each. The amount were payable as follows :

On Application --Rs 3 per share.

On allotment --Rs 5 per share.

On first and final call -- Rs 2 per share.

Application were received for 3,00,000 shares and pro-rata allotment was made to all the applicants. Money overpaid on application was adjusted towards allotment money. B, who was allotted 3,000 shares, 2,500 shares were reissued as fully paid up @ Rs 8 per share.

Pass necessary journal entries to record the above transactions in the books of Bhagwati Ltd.

OR

(a) A company forfeited 200, shares of Rs 20 each, Rs 15 per share called up on which Rs 10 per share had been paid Directors reissued all the forfeited shares to B as Rs 15 per share paid up, for a payment of Rs 10 each . Give journal entries in the books of the company for forfeiture and re-issue of shares.

(b) A Ltd. forfeited 100 equity shares of the face value of Rs 10 each, for the non-payment of first call of Rs 2 per share. Rs 6 per share had already been called and paid. These shares were subsequently re-issued as fully paid at the rate of Rs 7 per share. Give journal entries in the books of the company for forfeiture and re-issue of shares.

Answer 1

IN THE BOOKS OF BHAGWATI LTD.
JOURNAL
$\begin{array}{ccccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}& \\ & & & & \text{(Rs)}& \text{(Rs)}& \\ & \text{Bank A/c}(3,00,000\times 3)& Dr.& & 9,00,000& & \\ & \text{To Share Application A/c}& & & & 9,00,000& \\ & \underset{–}{\text{(Being money received for 3,00,000 shares)}}& & & & & \\ & \text{Share Application A/c}& Dr.& & 9,00,000& & \\ & \text{To Share Capital A/c}(2,00,000\times 3)& & & & 6,00,000& \\ & \text{To Share Allotment A/c}& & & & 3,00,000& \\ & \underset{–}{\text{(Being application money adjusted)}}& & & & & \\ & \text{Share Allotment A/c}(2,00,000\times 5)& Dr.& & 10,00,000& & \\ & \text{To Share Capital A/c}& & & & 10,00,000& \\ & \underset{–}{\text{(Being balance allotment money received)}}& & & & & \\ & \text{Bank A/c (10,00,000-3,00,000)}& Dr.& & 7,00,000& & \\ & \text{To share Allotment money received}& & & 7,00,000& & \\ & \underset{–}{\text{(Being balance allotment money received)}}& & & & & \\ & \text{Share First and Final Call A/c}(2,00,000\times 2)& Dr.& & 4,00,000& & \\ & \text{To share Capital A/c}& & & & 4,00,000& \\ & \underset{–}{\text{(Being first and final call due)}}& & & & & \\ & \text{Bank A/c}(1,97,000\times 2)& Dr.& & 3,94,000& & \\ & \text{To Share First and Final Call A/c}& & & & 3.94,000& \\ & \underset{–}{\text{(Being call money received except on 3,000 shares)}}& & & & & \\ & \text{Share Capital A/c}(3,000\times 10)& Dr.& & 30,000& & \\ & \text{To Forfeited Share A/c}(3,000\times 8)& & & & 24,000& \\ & \text{To Share First and Final Call A/c}(3,000\times 2)& & & 6,000& & \\ & \underset{–}{\text{(Being 3,000 shares forfeited due to non-payment of call money)}}& & & & & \\ & \text{Bank A/c}(2,500\times 8)& Dr.& & 20,000& & \\ & \text{Forfeited Share A/c}(2,500\times 2)& Dr.& & 5,000& & \\ & \text{To Share Capital A/c}& & & & 25,000& \\ & \underset{–}{\text{(Being 2,500 shares out of the forfeited shars re-issued as fully pair up 8 per share)}}& & & & & \\ & \text{Forefeited Shares A/c}& Dr.& & 15,000& & \\ & \text{To Capital Reserve A/c}& & & & 15,000& \\ & \text{(Being profit on re-issue transferred to capital reserve)}& & & & & \end{array}$

Working Notes :

Calculation of amount transferred to capital reserve :

Amount forfeited on 2500 share $=24,000\times \frac{2500}{3000}=$ 20,000

Less : Discount allowed on re-issue. $\underset{–}{5,000}$

Amount of profit on re-issue transferred to capital reserve $\underset{–}{15,000}$

(a) IN THE BOOKS OF COMPANY
JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ & \text{Share Capital A/c}(200\times 15)& Dr.& & 3,000& \\ & \text{To Forfeited Shares A/c}(200\times 10)& & & & 2000\\ & \text{To Calls-in-arrear A/c}(200\times 5)& & & & 1,000\\ & \underset{–}{\text{(Being 200 shares forfeited due to non-payment of Rs 5)}}& & & & \\ & \text{Bank A/c}(200\times 10)& Dr.& & 2,000& \\ & \text{Forfeited Shares A/c}(200\times 5)& Dr.& & 1,000& \\ & \text{To Share Capital A/c}(200\times 15)& & & & 3,000\\ & \text{(Being re-issue of forfeited shares Rs 15 per share paid)}& & & & \\ & \underset{–}{\text{up for payment of Rs 10 each)}}& & & & \\ & \text{Forfeited Shares A/c}& Dr.& & 1,000& \\ & \text{To Capital Reserve A/c}& & & & 1,000\\ & \text{(Being profit on re-issue of shares transferred to capital}& & & & \\ & \text{reserve)}& & & & \end{array}$

(b) IN THE BOOKS OF A. LTD.
JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ & \text{Share Capital A/c}(100\times 8)& Dr.& & 800& \\ & \text{To Forfeited Shares A/c}(100\times 6)& & & & 600\\ & \text{To Calls-in-arrear A/c}(100\times 2)& & & & 200\\ & \underset{–}{\text{(Being 100 equity shares forfeited for the non-payment of first call)}}& & & & \\ & \text{Bank A/c}(100\times 7)& Dr.& & 700& \\ & \text{Forfeited Shares A/c}(100\times 3)& Dr.& & 300& \\ & \text{To Share Capital A/c}& & & & 1000\\ & \text{(Being re-issue as fully paid up at therate of}& & & & \\ & \underset{–}{\text{Rs 7 per share)}}& & & & \\ & \text{Forfeited Shares A/c}& Dr.& & 300& \\ & \text{To Capital Reserve A/c}& & & & 300\\ & \text{(Being profit on re-issue of shares transferred to capital}& & & & \\ & \text{reserve)}& & & & \end{array}$