Question

The Orient Company offered for public subscription 20,000 equity shares of Rs.10 each at a premium of 10% payable at Rs.2 on application; Rs.4 on allotment including premium; Rs.3 on first call and Rs.2 on second and final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the money were received except the final call on 500 shares which were forfeited. 300 of the forfeited shares were later on issued as fully paid at Rs. 9 per share. Give journal entries and prepare the balance sheet.

Answer 1

$\text{Journal Entries}$
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Bank A/c}(26,000\times 2)& \text{Dr}& & 52,000& \\ & \text{To Share application A/c}& & & & 52,000\\ & \text{(Share application money received for}& & & & \\ & \text{26,000 shares @ Rs.2 per share )}& & & & \\ & \underset{–}{}& & & & \\ \text{(ii)}& \text{Share Application A/c}& \text{Dr}& & 52,000& \\ & \text{To Share Capital A/c}(20,000\times 2)& & & & 40,000\\ & \text{To Share Allotment A/c}(2,000\times 2)& & & & 4,000\\ & \text{To Bank A/c}(4,000\times 2)& & & & 8,000\\ & \text{(Application money @ Rs.2 per share of}& & & & \\ & \text{20,000 shares transferred to share capital account}& & & & \\ & \text{and money of 4,000 shares returned, remaining to}& & & & \\ & \text{share allotment)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iii)}& \text{Bank A/c}(80,000-4,000)& \text{Dr}& & 76,000& \\ & \text{To Share Allotment A/c}& & & & 76,000\\ & \text{(Share allotment money received for all the}& & & & \\ & \text{shares after adjustment of money transferred from}& & & & \\ & \text{share application)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iv)}& \text{Share Allotment A/c}& \text{Dr}& & 60,000& \\ & \text{To Share Capital A/c}(20,000\times 3)& & & & 60,000\\ & \text{To Share Premium A/c}(2,000\times 1)& & & & 20,000\\ & \text{(Share allotment money transferred}& & & & \\ & \text{to share capital and securities premium account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(v)}& \text{Bank A/c}(20,000\times 3)& \text{Dr}& & 60,000& \\ & \text{To Share First Call A/c}& & & & 60,000\\ & \text{(Share first call money received for 20,000 shares}& & & & \\ & \text{@ Rs.2 per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(vi)}& \text{Share First Call A/c}& \text{Dr}& & 60,000& \\ & \text{To Share Capital A/c}(20,000\times 3)& & & & 60,000\\ & \text{(Share first call money transferred to}& & & & \\ & \text{share capital account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(vii)}& \text{Bank A/c}(19,500\times 2)& \text{Dr}& & 39,000& \\ & \text{To Share Second and Final Call A/c}& & & & 39,000\\ & \text{(Share second and final call money received}& & & & \\ & \text{for 19,500 shares @ Rs. 2 per share and 500 shares}& & & & \\ & \text{failed to pay)}& & & & \\ & \underset{–}{}& & & & \\ \text{(viii)}& \text{Share Second and Final Call A/c}& \text{Dr}& & 40,000& \\ & \text{To Share Capital A/c}(20,000\times 2)& & & & 40,000\\ & \text{(Share second and final call money transferred}& & & & \\ & \text{to share capital account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ix)}& \text{Share Capital A/c}(500\times 10)& \text{Dr}& & 5,000& \\ & \text{To Share Second and Final Call A/c}(500\times 2)& & & & 1,000\\ & \text{To Share Forfeiture A/c}(500\times 8)& & & & 4,000\\ & \text{(500 shares of Rs.10 per share fully called-up}& & & & \\ & \text{forfeited for non-payment of second and final call}& & & & \\ & \text{Rs.2 per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(x)}& \text{Bank A/c}(300\times 9)& \text{Dr}& & 2,700& \\ & \text{Share Forfeiture A/c}(300\times 1)& \text{Dr}& & 300& \\ & \text{To Share Capital A/c}(300\times 10)& & & & 3,000\\ & \text{(300 shares @ Rs.10 each reissued for Rs.9 per}& & & & \\ & \text{share fully paid-up)}& & & & \\ & \underset{–}{}& & & & \\ \text{(xi)}& \text{Share Forfeiture A/c (Working Note)}& \text{Dr}& & 2,100& \\ & \text{To Capital Reserve A/c}& & & & 2,100\\ & \text{(Balance of 300 shares in share forfeiture}& & & & \\ & \text{account transferred to capital reserve account,}& & & & \\ & \text{after adjustment)}& & & & \end{array}$

Working Note :
Calculation of Capital Reserve
$\begin{array}{cc}& \\ \text{Money transferred to share forfeiture against forfeiture}& Rs.2,400\\ \text{of 300 shares}(300\times 8)& \\ \text{(-) Money adjusted on reissue of 300 shares}& \\ \text{from forfeiture account}(300\times 1)& Rs.300\\ \text{Amount transferred to Capital Reserve}& \overline{\underset{–}{Rs.2,100}}\end{array}$