Question

R.K.Ltd., invited applications for issuing 80,000 equity shares of Rs 10 each at a premium of Rs 35 per share. The amount was payable as follows:
On Application Rs 8 (including Rs 5 premium) per share.
On Allotment Rs 12 (including Rs 10 premium) per share.

On First and Final Call Balance.

Application for 75,000 shares were received and allotment was made to all the applicants. Rahim, a shareholder who was allotted 3,000 shares failed to pay allotment money and his shares were immediately forfeited. Afterwards, the first and final call was made. Suhani who held 3,000 shares failed to pay the final call. Her shares were also forfeited. All the forfeited shares were re-issued for a sum of Rs 62,000 as fully paid up.

Pass the necessary Journal entries for the above transactions in the books of R.K.Ltd.

OR

Sargam Ltd., invited applications for issuing 80,000 equity shares of Rs 100 each at a premium. The amount was payable as follows :

On Application Rs 20 per share.

On Allotment Rs 60 (including premium) per share.

On First and Final Call Rs 40 per share.

Application for 1,20,000 shares were received. Allotment was made on pro-rata basis to all the applicants. Excess money received on applications was adjusted on sums due to allotment. Sitaram, who had applied for 6,000 shares failed to pay the allotment money and Harnam did not pay first and final call on 800 shares allotted to him. The shares of Sitaram and Harnam were forfeited. 4,200 of these shares were re-issued for Rs 100 per share as fully paid up. The re-issued shares included all the forfeited shares of Harnam.

Pass necessary Journal entries for the above transactions in the books of Sargam Ltd.

Answer 1

JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(RS)}\\ & \text{Bank A/c}& \text{Dr.}& & 6,00,000& \\ & \text{To Equity Share Application A/c}& & & & 6,00,000\\ & \text{(Being application money @ Rs 8 received on 75,000}& & & & \\ & \underset{–}{\text{equity shares)}}& & & & \\ & \text{Equity Share Application A/c}& \text{Dr.}& & 6,00,000& \\ & \text{To Equity Share Capital A/c}(75,000\times 3)& & & & 2,25,000\\ & \text{To Securities Premium Reserve}(75,000\times 5)& & & & 3,75,000\\ & \underset{–}{\text{(Being application money and premium adjusted)}}& & & & \\ & \text{Equity Share Allotment A/c}& \text{Dr.}& & 9,00,000& \\ & \text{To Equity Share Capital A/c}& & & & 1,50,000\\ & \text{To Securities Premium Reserve A/c}& & & & 7,50,000\\ & \text{(Being Share allotment money due on 75,000 shares of}& & & & \\ & \underset{–}{\text{Rs 12 including premium of Rs 10)}}& & & & \\ & \text{Bank A/c}(72,000\times 12)& \text{Dr.}& & 8,64,000& \\ & \text{To Equity Share Allotment A/c}& & & & 8,64,000\\ & \text{(Being allotment money @ Rs 12 received on 72,000}& & & & \\ & \underset{–}{\text{shares except on 3,000 shares)}}& & & & \\ & \text{Equity Share Capital A/c}(3,000\times 5)& \text{Dr.}& & 15,000& \\ & \text{Securities Premium Reserve A/c}(3,000\times 10)& \text{Dr.}& & 30,000& \\ & \text{To Equity Share Allotment A/c}(3,000\times 12)& & & & 36,000\\ & \text{To Shares Forfeited A/c}(3,000\times 3)& & & & 9,000\\ & \text{(Being 3,000 shars forfeited for non-payment of}& & & & \\ & \underset{–}{\text{allotment money)}}& & & & \\ & \text{Equity Share First and Final Call A/c}& \text{Dr.}& & 18,00,000& \\ & \text{To Equity Share Capital A/c}(72,000\times 5)& & & & 3,60,000\\ & \text{Securities Premium Reserve A/c}(72,000\times 20)& & & & 14,40,000\\ & \underset{–}{\text{(Being first and call due @ Rs 25 on 72,000 shares)}}& & & & \\ & \text{Bank A/c}(69,000\times 25)& \text{Dr.}& & 17,25,000& \\ & \text{To Equity Share First and Final Call A/c}& & & & 17,25,000\\ & \text{(Being first and final call money received except on 3,000}& & & & \\ & \underset{–}{\text{shares)}}& & & & \\ & \text{Equity Share Capital A/c}(3,000\times 10)& \text{Dr.}& & 30,000& \\ & \text{Securities Premium Reserve A/c}(3,000\times 20)& & & 60,000& \\ & \text{To Equity Share First and Final Call}(3,000\times 25)& & & & 75,000\\ & \text{To Shares Forfeited A/c}(3,000\times 5)& & & & 15,000\\ & \underset{–}{\text{(Being shares forfeited for non-payment of call money)}}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 62,000& \\ & \text{To Equity Share Capital A/c}& & & & 60,000\\ & \text{To Securities Premium Reserve A/c}& & & & 2,000\\ & \text{(Being forfeited shares re-issued for Rs 62,000 as fully}& & & & \\ & \underset{–}{\text{paid up)}}& & & & \\ & \text{Shares Forfeited A/c}(9,000+15,000)& \text{Dr.}& & 24,000& \\ & \text{To Capital Reserve A/c}& & & & 24,000\\ & \text{(Being gain on re-issue of forfeited shares transferred to}& & & & \\ & \text{Capital Reserve)}& & & & \end{array}$

OR

JOURNAL OF SARGAM LTD.
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(RS)}\\ & \text{Bank A/c}& \text{Dr.}& & 24,00,000& \\ & \text{To Equity Share Application A/c}& & & & 24,00,000\\ & \text{(Being application money @ Rs 20 received on 1,20,000}& & & & \\ & \underset{–}{\text{shares)}}& & & & \\ & \text{Equity Share Application A/c}& \text{Dr.}& & 24,00,000& \\ & \text{To Equity Share Capital A/c}& & & & 16,00,000\\ & \text{To Equity Share Allotment A/c}& & & & 8,00,000\\ & \text{(Being excess application money received adjusted}& & & & \\ & \underset{–}{\text{against allotment)}}& & & & \\ & \text{Equity Share Allotment A/c}& \text{Dr.}& & 48,00,000& \\ & \text{To Equity Share Capital A/c}& & & & 32,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 16,00,000\\ & \underset{–}{\text{(Being allotment money @ Rs 60 on 80,000 shares)}}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 38,00,000& \\ & \text{To Equity Share Allotment A/c}& & & & 38,00,000\\ & \underset{–}{\text{(Being allotment money received)}}& & & & \\ & \text{Equity Share First and Final Call A/c}& \text{Dr.}& & 32,00,000& \\ & \text{To Equity Share Capital A/c}& & & & 32,00,000\\ & \text{(Being first and final call money due on 80,000 shares @}& & & & \\ & \underset{–}{\text{Rs 40 per share)}}& & & & \\ & \text{Bank A/c}(80,000-4,000-8000)\times 40& \text{Dr.}& & 30,08,000& \\ & \text{To Equity Share First and Final Call A/c}& & & & 30,08,000\\ & \underset{–}{\text{(Being first and final call money received )}}& & & & \\ & \text{Equity Share Capital A/c}(4,800\times 100)& \text{Dr.}& & 4,80,000& \\ & \text{Securities Premium Reserve A/c}(4,000\times 20)& \text{Dr.}& & 80,000& \\ & \text{To Equity Share Allotment A/c}& & & & 2,00,000\\ & \text{Equity Share First and Final Call A/c}(4,800\times 40)& & & & 1,92,000\\ & \text{To Shares Forfeited A/c}(6,000\times 20+800\times 60)& & & & 1,68,000\\ & \text{(Being 4,800 shares forfeited for non-payment of}& & & & \\ & \underset{–}{\text{allotment and call money)}}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 4,20,000& \\ & \text{To Equity Share Capital A/c}& & & & 4,20,000\\ & \underset{–}{\text{(Being 4,200 forfeited shares re-issued for Rs 100 per share)}}& & & & \\ & \text{Shares Forfeited A/c}& \text{Dr.}& & 1,50,000& \\ & \text{To Capital Reserve A/c}& & & & 1,50,000\\ & \text{(Being gain on re-issue of forfeited shares transferred to}& & & & \\ & \text{capital reserve)}& & & & \end{array}$

Working Notes :

Calculation of allotment money not paid by Sitaram :

(a) Number of shares allotted to sitaram $=\frac{80,000\times 6,000}{1,20,000}=4,000$ shares

(b) Money not paid on allotment

1. Money paid on application (6,000 $\times$ 20) 1,20,000

Less: Amount adjusted on allotment (4,000 $\times$ 20) 80,000

Excess application money adjusted on allotment $\underset{–}{\overline{40,000}}$

Money due on allotment (4,000 $\times$ 60) 2,40,000

Less: Excess application money adjusted 40,000

Money not paid by Sitaram on allotment $\underset{–}{\overline{2,00,000}}$

2. Money received on allotment

Total amount due on allotment $(80,000\times 60)$ 48,00,000

Less: Excess application money adjusted 8,00,000

$\overline{40,00,000}$

Less : Money not received from Sitaram on allotment 2,00,000

Money received on allotment $\underset{–}{\overline{38,00,000}}$

3. Calculation of profit on re-issue to be transferred to capital reserve.

Amount forfeited on re-issue of Sitaram's 3,400 shares
= 1,20,000 $\times$ 3,400 / 4,000 1,02,000

Harman's 800 shares 48,000

Total gain on re-issue to be transferred $\underset{–}{\overline{1,50,000}}$