Volume-2 | Chapter-1 | Question 86 to 88 | Issue of Share Capital | Ts grewal solution 2020-21 | Class-12th

Page No 8.125:

Question 86:

Nitro Paints Ltd. invited applications for issuing 1,60,000 equity shares of  ` 10 each at a premium  of  ` 3 per share. The amount was payable as follows:

On application	—	` 6 per share(including premium  `1);
On allotment	—	` 3 per share(including premium  ` 1); and
The balance	—	On First and Final call.

Applications for 1,80,000  shares were received .Applications for 10,000  shares were rejected and pro rata allotment was made to the remaining applicants.Over payment received on application was adjusted towards sums due on allotment . All calls were made and were duly received except allotment and final call from Aditya who was  allotted 3,200 shares. His shares were forfeited . Half of the forfeited shares were reissued for  ` 43,000  as fully paid-up .
Pass necessary journal entries for the above transactions in the books of Nitro Paints Ltd.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount ( `)	Credit Amount ( `)
	Bank A/c (1,80,000 × 6)	Dr.		10,80,000
	To Equity Share Application A/c				10,80,000
	(Application money received)
	Equity Share Application A/c	Dr.		10,80,000
	To Equity Share Capital A/c (1,60,000 × 5)				8,00,000
	To Securities Premium Reserve A/c  (1,60,000 × 1)				1,60,000
	To Share Allotment A/c(10,000×6)				60,000
	To Bank A/c (10,000×6)				60,000
	(Application money transferred)
	Equity Share Allotment A/c (1,60,000 × 3)	Dr.		4,80,000
	To Equity Share Capital A/c (1,60,000 × 2)				3,20,000
	To Securities Premium Reserve A/c (1,60,000 × 1)				1,60,000
	(Allotment money due)
	Bank A/c (4,80,000 ─ 60,000 ─ 8,400)	Dr.		4,11,600
	To Equity Share Allotment A/c				4,11,600
	(Allotment money received)
	Equity Share First Call A/c (1,60,000 × 4)	Dr.		6,40,000
	To Equity Share Capital A/c				4,80,000
	To Securities Premium Reserve A/c				1,60,000
	(Call money due)
	Bank A/c	Dr.		6,27,200
	To Equity Share First Call A/c				6,27,200
	(Call money received)
	Equity Share Capital A/c (3,200 × 10)	Dr.		32,000
	Securities Premium Reserve A/c (3,200 × 2)	Dr.		6,400
	To Equity Share Allotment A/c				8,400
	To Equity Share First & Final Call A/c				12,800
	To Equity Share Forfeiture A/c				17,200
	(3,200 shares forfeited)
	Bank A/c	Dr.		43,000
	To Equity Share Capital A/c				16,000
	To Securities Premium A/c				27,000
	(1,600 shares re–issued)
	Equity Share Forfeiture A/c	Dr.		8,600
	To Capital Reserve A/c				8,600
	(Profit on re-issue transferred)

Working Notes:
Shares Applied by Aditya=1,70,000/1,60,000×3,200=3,400

 

Amount unpaid by Aditya on Allotment
Application money received	20,400
Less: Transferred to Share Capital	(19,200)
Excess received on Application	1,200
Allotment money due	9,600
Less: Excess adjustment	(1,200)
Amount unpaid by Aditya	8,400

Page No 8.125:

Question 87:

Raja Ltd. invited applications for issuing 50,000 Equity Shares of  ` 10 each . The amount was payable as follows:           

On application                    —                     ` 3 per share,               On allotment                       —                     ` 5 per share,               On first and final call          —                    Balance.

Applications for 70,000 shares were received . Allotment was made to all applicants on pro rata basis. Excess money received on application was adjusted towards sums due on allotment . Ramesh, who had applied for 700 shares , did not pay the allotment money and on his failure to pay the allotment money his shares were forfeited. Afterwards , the first and the final call was made . Adhar, who had been allotted 500 shares, did not pay the first and final call . His shares were also forfeited . Out of the forfeited shares 900 shares were reissued at  ` 8 per share as fully paid-up . The reissued shares included all the  shares of Ramesh.
Pass necessary journal entries for the above  transactions in the books of the company. 

Answer:

Journal
Date	Particulars		L.F.	Debit Amount  `	Credit Amount  `
	Bank A/c (3×70,000)	Dr.		2,10,000
	To Equity Share Application A/c				2,10,000
	(Application money on 70,000 shares received)
	Equity Share Application A/c	Dr.		2,10,000
	To Equity Share Capital A/c (3×50,000)				1,50,000
	To Equity Share Allotment A/c (WN2)				60,000
	(Share Application money on 50,000 shares transferred to share capital account and excess was utilised on allotment)
	Equity Share Allotment A/c	Dr.		2,50,000
	To Equity Share Capital A/c				2,50,000
	(Allotment money due on allotment)
	Bank A/c (WN2)	Dr.		1,88,100
	To Equity Share Allotment A/c				1,88,100
	(Allotment money received on 49,500 shares and  ` 60,000 excess money adjusted)
	Equity Share Capital A/c	Dr.		4,000
	To Equity Share Allotment A/c(WN1)				1,900
	To Equity Share Forfeiture A/c(WN1)				2,100
	(500 shares forfeited for non payment of allotment money
	Equity Share First and Final Call A/c	Dr.		99,000
	To Equity Share Capital A/c				99,000
	(Share Call money due)
	Bank A/c	Dr.		98,000
	To Equity Share First and Final Call A/c				98,000
	(Call money received on 49,000 shares)
	Equity Share Capital A/c	Dr.		5,000
	To Equity Share First and Final Call A/c				1,000
	To Equity Share Forfeiture A/c (8×500)				4,000
	(500 shares forfeited for non payment of Call money)
	Bank A/c	Dr.		7,200
	Equity Share Forfeiture A/c	Dr.		1,800
	To Equity Share Capital				9,000
	(900 shares reissued at  ` 8 per share)
	(Share call money received and Calls-in-Advance money adjusted)
	Share Forfeiture A/c (WN3)	Dr.		3,500
	To Capital Reserve A/c				3,500
	(Profit on forfeiture of shares transferred)

Working Note:

1.

 

Share applied by Ramesh = 700 shares
Share allotted 700×50,000 / 70,000 = 500 shares
Application money received from Ramesh 700×3	=	2,100
Less application money due on allotted shares 500×3	=	(1,500)
Excess application money adjusted on allotment	=	600
Allotment money due on shares allotted 5×500	=	2500
Less excess application on money received=	=	( 600)
Allotment money due but not received	=	1900

 2.

Allotment Dew (gross) 50,000×5	=	2,50,000
Less: Adjusted	=	(60,000)
Less: Arrears	=	(1,900)
		1,88,100

 

3.

Forfeiture of 500 shares issued to Aadhar

Amount due on first and final call: 2×500 =1,000
Total amount due on first and final call: 2×49,500	=	99,000
Less-  areas	=	1,000
		98,000
Share forfeiture on Ramesh share	=	2,100
proportionate share for feature on others share 4,000×400/500	=	3,200
		5,300
Less - loss on Re-issue	=	1,800
Profit on reissue transferred to Capital Reserve	=	3,500

Page No 8.126:

Question 88:

XYZ Ltd. invited applications for issuing 50,000 Equity Shares of   `10 each . The amount was payable as:
 

On application	—	` 3 per share,
On allotment	—	` 4 per share,
On first and final call	—	` 3 per share.

Applications were received for 75,000 shares and pro rata allotment was made as:
Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis.
Applicants for 35,000 shares were allotted 30,000 shares on pro rata basis.
Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment .
Shamu, who had applied for 700 shares out of the group applying for 35,000 shares , failed to pay the first  and final call . His shares were also forfeited. Out of the forfeited shares, 1,000 shares were reissued @ Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis. 8 per share as fully paid-up. The reissued  shares included all the forfeited shares of Shamu.
Pass necessary Journal entries to record the above transactions.

Answer:

Issued 1,000 equity shares of  ` 10 each

Applied 1,800 shares

Allotment made as:			Amount payable per shares as:
Applied		Allotted		Application	` 3
40,000		30,000		Allotment	` 4
35,000		20,000		First Call	` 3
1,800		1,000			` 10

 

 

Books of XYZ Limited Journal Entries
Date	Particulars		L.F.	Debit Amount  `	Credit Amount  `
	Bank A/c	Dr.		2,25,000
	To Equity Share Application A/c				2,25,000
	(Share application money received for 75,000 shares at  ` 3 each)
	Equity Share Application A/c	Dr.		2,25,000
	To Equity Share Capital A/c				1,50,000
	To Equity Share Allotment A/c				75,000
	(Application money of 50,000 shares transferred to share capital and the remaining amount adjusted on allotment)
	Equity Share Allotment A/c	Dr.		2,00,000
	To Equity Share Capital A/c				2,00,000
	(Share allotment due on 50,000 shares at  ` 4 each)
	Bank A/c	Dr.		1,21,400
	To Equity Share Allotment A/c				1,21,400
	(Share allotment received on 48,800 shares after adjusting the excess money on application)
	Equity Share Capital A/c (1,200 ×  ` 7)	Dr.		8,400
	To Share Forfeiture A/c				4,800
	To Equity Share Allotment A/c				3,600
	(1,200 shares of  ` 10 each  ` 7 called-up forfeited for the non-payment of allotment)
	Equity Share First and Final Call A/c	Dr.		1,46,400
	To Equity Share Capital A/c				1,46,400
	(First and final call due on 48,800 shares at  ` 3 each)
	Bank A/c	Dr.		1,45,200
	To Equity Share First and Final Call A/c				1,45,200
	(Share first and call received 48,800 shares at  ` 3 each)
	Equity Share Capital A/c	Dr.		4,000
	To Share Forfeiture A/c (400 ×  ` 7)				2,800
	To Equity Shares First and Final Call A/c				1,200
	(400 shares forfeited for the non-payment of first and final call)
	Bank A/c	Dr.		8,000
	Share Forfeiture A/c	Dr.		2,000
	To Equity Share Capital A/c				10,000
	(1,000 shares of  ` 10 each re-issued at  ` 8 per share fully paid-up)
	Share Forfeiture A/c	Dr.		3,200
	To Capital Reserve A/c				3,200
	(Balance of 1,000 re-issued shares in Share Forfeiture Account transferred to Capital Reserve Account)

 

Working Notes-

Rumu’s Share

Number of shares applied = 40,000/30,000×1,200 = 1,600 shares

Money received on Application 1,600 shares ×  ` 3	=	` 4,800
Money adjusted on Application 1,200 Shares ×  ` 3	=	` 3,600
Excess on Application		` 1,200

 

Allotment due on 1,200 shares ×  ` 4	=	4,800
Less: Excess money on Application	=	1,200
Calls-in-Arrears on Allotment		3,600

 

Share Allotment

Share Allotment due 50,000 shares ×  ` 4	=	2,00,000
Less: Excess money on application	=	75,000
		1,25,000
Less: Calls-in-Arrears on Allotment	=	3,600
Money received on Allotment	=	1,21,400

Shamu’s Shares

Number of shares allotted to Shamu =20,000/35,000×700 = 400 shares

First and Final Call

First and Final Call due; 48,800 shares ×  ` 3	=	1,46,400
Less: Calls-in-Arrears by Shamu; 400 shares ×  ` 3	=	1,200
Money received on of First and Final Call		1,45,200

Capital Reserve

Shares re-issued out the shares forfeited from Ramu = 1,000 shares − Shamu’s shares

= 1,000 − 400

= 600 shares

on re-isssue Ramu’s shares:

Capital Reverse on re-issue of 600 shares forfeited from Ramu
Share Forfeiture Cr. 4,800/1,200	=	`	4
Share Forfeiture Dr.	=	`	2
Share Forfeiture after re-issued		`	2	per share

Capital Reserve after re-issue of 600 shares = Share Forfeiture after re-issue (per share) × 600 shares

=  ` 2 × 600

=  ` 1,200

on re-isssue Shamu’s shares:

Share Forfeiture	Cr.	` 7
Share Forfeiture	Dr.	` 2
Share Forfeiture after re-issue		` 5	per share

Capital Reserve after re-issue of 400 shares = Share Forfeiture after re-issue (per share) × 600 shares

=  ` 5 × 400

=  ` 2,000

Total amount of Capital Reserve = Capital Reserve of 600 shares + Capital Reserve of 400 shares

Total amount of Capital Reserve	= Capital Reserve of 600 shares + Capital Reserve of 400 shares
	=  ` 1,200 +  ` 2,000
	=  ` 3,200

 

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