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Question

Prince Limited issued a prospectus inviting applications for 20,000 equity shares of ₹10 each at a premium of ₹ 3 per share payable as follows:
With application
₹2,
On allotment (including premium) ₹5,
On first call ₹3,
On second call ₹3.

Applications were received for 30,000 shares and allotment was made on pro rata basis. Money overpaid on application s was adjusted to the amount due on allotment.
Mr Mohit whom 400 shares were allotted , failed to pay the allotment money and the first call , and his shares were forfeited after the first call . Mr Joly, whom 600 shares were allotted , failed to pay for the two calls and hence, his shares were forfeited .
Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for ₹ 9 per share , the whole of Mr Mohit's shares being included.

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Solution

Journal
Date
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Bank A/c
Dr.
60,000
To Share Application A/c
60,000
(Application money received on 30,000 shares @ Rs 2 per share)
Share Application A/c
Dr.
60,000
To Share Capital A/c
40,000
To Share Allotment A/c
20,000
(Application money received transferred to Share Capital and adjusted on allotment)
Share Allotment A/c
Dr.
1,00,000
To Share Capital A/c
40,000
To Securities Premium A/c
60,000
(Allotment money due on 20,000 shares @ Rs 5 per share including premium of Rs 3 per share)
Bank A/c (1,00,000 – 20,000 – 1,600)
Dr.
78,400
To Share Allotment A/c
78,400
(Allotment money received)
Share First Call A/c
Dr.
60,000
To Share Capital A/c
60,000
(Share First Call due on 20,000 shares @ Rs 3 per share)
Bank A/c (60,000 – 1,200 – 1,800)
Dr.
57,000
To Share First Call A/c
57,000
(First call money received)
Share Capital A/c
Dr.
2,800
Share Premium A/c
Dr.
1,200
To Share Forfeiture A/c
1,200
To Share Allotment A/c
1,600
To Share First Call A/c
1,200
(400 shares forfeited)
Share Second Call A/c
Dr.
58,800
To Share Capital A/c
58,800
(Final Call money due on 19,600 shares @ 3 per share)
Bank A/c (58,800 – 1,800)
Dr.
57,000
To Share Second Call A/c
57,000
(Second Call money received)
Share Capital A/c
Dr.
6,000
To Share Forfeiture A/c
2,400
To Share First Call A/c
1,800
To Share Second Call A/c
1,800
(600 shares forfeited)
Bank A/c
Dr.
7,200
Share Forfeiture A/c
Dr.
800
To Share Capital A/c
8,000
(800 shares reissued @ Rs 9 each)
Share Forfeiture A/c
Dr.
2,000
To Capital Reserve
2,000
(Profit on re–issue transferred to Capital Reserve)
Balance Sheet
Particulars
Note No.
Amount
(₹)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital
1
1,98,800
b. Reserves and Surplus
2
60,800
2. Non-Current Liabilities
3. Current Liabilities
Total
2,59,600
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents
3
2,59,600
Total
2,59,600

NOTES TO ACCOUNTS
Note No.
Particulars
Amount
1
Share Capital
Authorised Share Capital
…….. shares of Rs 10 each
Issued Share Capital
20,000 shares of Rs 10 each
2,00,000
Subscribed, Called–up and Paid–up Share Capital
19,800 shares of Rs 10 each
1,98,000
Add: Share Forfeiture (200 × 4)
800
1,98,800
2
Reserves and Surplus
Securities Premium
58,800
Capital Reserve
2,000
60,800
3
Cash and Cash Equivalents
Cash at Bank
2,59,600

Working Notes:

WN1: Calculation of unpaid amount on allotment by Mohit

Shares Applied by Mohit=30,00020,000×400=600

Money received on Application (600×2)
1,200
Less: Adjusted on application (400×2)
(800)
Excess amount received
400
Amount due on Allotment (400×5)
2,000
Less: Excess amount received
(400)
Amount unpaid on allotment
1,600

WN2: Calculation of Amount to be transferred to Capital Reserve
Amount forfeited on Mohit’s 400 shares(600×2)
1,200
Amount forfeited on Joly’s 400 shares (400 × 4)
1,600
Total Credit Balance in Share Forfeiture
2,800
Less: Discount allowed on 800 shares reissued
(800)
Amount to be transferred to Capital Reserve
2,000

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