Question

Margo Ltd, issued 1,00,000 equity shares of Rs 10 each at a premium of Rs 2 per share payable on call money, to the public for which they got full subscription. A shareholder holding 2,500 shares failed to pay call money of Rs 5 per share, and his shares were forfeited. Later on 70% of the forfeited shares were re-issued to Mr. Shyam for Rs 8 per share as fully paid up. Find out the capital reserve and also pass the necessary Journal entries.

Answer 1

JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ & \text{Equity Share Capital A/c}& \text{Dr.}& & 25,000& \\ & \text{Securities Premium Reserve A/c}& \text{Dr.}& & 5,000& \\ & \text{To Calls in Arrears A/c}& & & & 12,500\\ & \text{To Share Forfeiture A/c}& & & & 17,500\\ & \text{(Being 2,500 shares forfeited for non-payment of call}& & & & \\ & \underset{–}{\text{money})}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 14,000& \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 3,500& \\ & \text{To Equity Share Capital A/c}& & & & 17,500\\ & \underset{–}{\text{(Being}70\%\text{of forfeited shares were re-issued)}}& & & & \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 8,750& \\ & \text{To Capital Reserve A/c}& & & & 8,750\\ & \text{(Being profit on re-issue transferred to capital reserve)}& & & & \\ & (17,500/2,500)\times 1,750-3,500& & & & \end{array}$