Volume-2 | Chapter-1 | Question 89 to 91 | Issue of Share Capital | Ts grewal solution 2020-21 | Class-12th

Page No 8.126:

Question 89:

Bharat Ltd . invited applications for issuing 2,00,000 Equity Shares of  `  10 each. The amount was payable as:
On application  `  3 per share , on allotment  `  5 per share and on first and final call  `  2 per share. Applications for 3,00,000 shares were received and pro rata allotment was made to all the applicants on the following basis:
Applicants for 2,00,000 shares were  allotted 1,50,000 shares on pro rata basis.
Applicants for 1,00,000 shares were allotted  50,000 shares on pro rata basis.
Bajaj, who was allotted 3,000 shares out of group applying for 2,00,000 shares failed to pay the allotment money. His shares were forfeited immediately after allotment . Sharma, who had  applied for 2,000 shares out of the group applying for 1,00,000 shares failed to pay the first and final call . His shares  were also forfeited.
Out of the forfeited shares 3,500 shares were reissued as fully paid-up @  ` 8 per share . The reissued shares included all the forfeited shares of Bajaj.
Give necessary  journal entries to record the above transactions.

Answer:

Issued capital 2,00,000 shares of  ` 10 each.

Applied shares 3,00,000

Allotment made as:				Payable as:
Applied		Allotted		Application	` 3
2,00,000		1,50,000		Allotment	` 5
1,00,000		50,000		First and Final Call	` 2
3,00,000		2,00,000			` 10	per share

 

Books of Bharat Ltd. Journal
Date	Particulars		L.F.	Debit Amount  `	Credit Amount  `
	Bank A/c	Dr.		9,00,000
	To Equity Share Application A/c				9,00,000
	(Application money received for 3,00,000 shares at  ` 3 each)
	Equity Share Application A/c	Dr.		9,00,000
	To Equity Share Capital A/c				6,00,000
	To Equity Share Allotment A/c				3,00,000
	(Application money of 2,00,000 shares at  ` 3 each transferred to Shares Capital and excess money  ` 3,00,000 adjusted on allotment)
	Equity Share Allotment A/c	Dr.		10,00,000
	To Equity Share Capital A/c				10,00,000
	(Allotment due on 2,00,000 shares at  ` 5 each)
	Bank A/c	Dr.		6,88,000
	To Equity Share Allotment A/c				6,88,000
	(Allotment received on 1,97,000 shares)
	Equity Share Capital A/c	Dr.		24,000
	To Share Forfeiture A/c				12,000
	To Share Allotment A/c				12,000
	(3,000 shares forfeited for the non-payment of money due on allotment)
	Equity Share First and Final Call A/c	Dr.		3,94,000
	To Equity Share Capital A/c				3,94,000
	(First and Final call due on 1,97,000 shares at  ` 2 per share)
	Bank A/c			3,92,000
	To Equity Share First and Final Call A/c				3,92,000
	(Share First and Final Call received on 1,97,000 shares)
	Equity Share Capital A/c	Dr.		10,000
	To Share Forfeiture A/c				8,000
	To Equity Share First and Final Call A/c				2,000
	(1,000 shares forfeited for the non-payment of first and final call)
	Bank A/c	Dr.		28,000
	Share Forfeiture A/c	Dr.		7,000
	To Equity Share Capital A/c				35,000
	(3,500 shares of  ` 10 each re-issued at  ` 8 per share fully paid-up)
	Share Forfeiture A/c	Dr.		9,000
	To Capital Reserve A/c				9,000
	(Balance in Share Forfeiture of 3,500 re-issued shares transferred to Capital Reserve)

 

Working Note:

Bajaj’s Share

Number of shares applied =2,00,000/1,50,000×3,000= 4,000 shares

Money received on Application (4,000 shares ×  ` 3)	=	12,000
Less: Money transferred to Shares capital (3000 shares ×  ` 3)	=	9,000
Excess money on Application		3,000

 

Allotment due (3,000 shares ×  ` 5)	=	15,000
Less: Excess money on application	=	3,000
Calls-in-Arrears on Allotment		12,000

Share Allotment

Money due an allotment (2,00,000 shares ×  ` 5)	=	10,00,000
Less: Excess money on Application	=	3,00,000
Less: Calls-in-Arrears on Bajaj’s shares	=	12,000
Money received on Allotment	=	` 6,88,000

Sharma’s shares

Number of shares allotted =50,000/1.00,000×2000 = 1000 shares

Capital Reserve

Forfeiture of shares held by Bajaj

Share Forfeiture Credit 12,000/3000	=	` 4 per shares
Share Forfeiture Debit on re-issue	=	` 2	per share
Share Forfeiture after re-issue		` 2	per share

 

Capital Reserve on re-issue of Bajaj’s shares	=	` 2 × 3,000 (no. of shares re-issued)
	=	` 6,000

Forfeiture of shares held by Sharma

Share Forfeiture Credit	` 8	per share
Share Forfeiture Debit on re-issue	` 2	per share
	` 6	per share

Capital Reserve on re-issue of 500 Shares of Sharma =  ` 6 × 500 (no. of shares re-issued) =  ` 3,000

Total Capital Reserve on 3,500 shares = 6,000 (re-issue of Bajaj’s) + 3,000 (re-issue of Sharma’s) =  ` 9,000

Page No 8.126:

Question 90:

Max Ltd. invited applications for 2,00,000 Equity Shares of  `  10 each to be issued at 20% premium. The money payable per shares was: on application  `  5, on allotment  `  4 (including premium of  `  2), first call  `  2  and final call  `  1.

Applications were received for 2,40,000 shares and allotment was made as:
(i) to applicants for 1,00,000 shares— in full,
(ii) to applicants for 80,000 shares—60,000 shares,
(iii) to applicants for 60,000 shares—40,000 shares.

Applicants of 1,000 shares falling in Category
(i) and applicants of 1,200 shares falling in Category
(ii) failed to pay allotment money. These shares were forfeited on failure to pay first call. Holders of 1,200 shares falling in Category
(iii) failed to pay the first and final call and these shares were forfeited after final call.

1,300 shares[1,000 of Category(i) and 300 of Category (ii)] were reissued at  `  8 per share as fully paid-up.
Journalise the above transactions. Prepare Cash book and Balance Sheet.

Answer:

Applied shares 2,40,000

Allotment made as:				Payable as:
Applied		Allotted		Application	` 5
1,00,000		1,00,000		Allotment	` 4	(2 + 2)
80,000		60,000		First Call	` 2
60,000		40,000		Final Call	Re 1
2,40,000		2,00,000			` 12	(10 + 2) per share

 

Cash Book
Dr.					Cr.
Date	Particulars	Amount  `	Date	Particulars	Amount  `
	Equity Share Application (2,40,000 ×  ` 5)	12,00,000		Balance c/d
	Equity Share Allotment (See note-2)	5,93,900
	Equity Share First Call (See note-3)	3,93,800
	Equity Share First Call	1,96,900
	(1,96,900 shares × Re 1)
	Equity Share Capital (1,000 shares of category i)	8,000
	Equity Share Capital (300 shares of category ii)	2,400			23,95,000
		23,95,000			23,95,000

 

 

Journal
Date	Particulars		L.F.	Debit Amount  `	Credit Amount  `
	Equity Share Application A/c	Dr.		12,00,000
	To Equity Share Capital A/c				10,00,000
	To Equity Share allotment A/c				2,00,000
	(Equity Share application money of 2,00,000 shares at  ` 5 each transferred to Share Capital and  ` 2,00,000 adjusted on allotment)
	Equity Share Allotment A/c	Dr.		8,00,000
	To Equity Share Capital A/c				4,00,000
	To Securities Premium A/c				4,00,000
	(Share allotment due on 2,00,000 shares at  ` 4 each including  ` 2 premium)
	Equity Share First Call A/c	Dr.		4,00,000
	To Equity Share Capital A/c				4,00,000
	(First call due on 2,00,000 shares at  ` 2 each)
	Equity Share Capital A/c	Dr.		9,000
	Securities Premium A/c	Dr.		2,000
	To Share Forfeiture A/c (900 shares ×  ` 5)				5,000
	To Equity Share Allotment A/c (900 shares ×  ` 4)				4,000
	To Equity Share First Call A/c (900 shares ×  ` 2)				2,000
	(1,000 shares of category (i)  ` 10 each, on which  ` 8 had  called-up, forfeited for the non-payment of amount due)
	Equity Share Capital A/c	Dr.		8,100
	Securities Premium A/c	Dr.		1,800
	To Share Forfeiture A/c				6,000
	To Equity Shares Allotment A/c				2,100
	To Equity Shares First-Call A/c				1,800
	(900 shares of category (ii) forfeited for the non-payment of amount due)
	Equity Share Final Call A/c	Dr.		1,98,100
	To Equity Shared Capital A/c				1,98,100
	(Final call due on 1,98,100 shares at Re 1 each)
	Equity Share Capital A/c	Dr.		12,000
	To Share Forfeiture A/c				8,400
	To Share First Call A/c				2,400
	To Share Final Call A/c				1,200
	(1,200 shares of category (iii) forfeited for the non-payment amount due)
	Share Forfeiture A/c	Dr.		2,000
	To Equity Share Capital A/c				2,000
	(Loss on re-issue of 1,000 shares of category (i) charged from Share Forfeiture Account)
	Share Forfeiture A/c	Dr.		600
	To Equity Share Capital A/c				600
	(Loss on re-issue of 300 of category (ii) charged from Share Forfeiture Account)
	Share Forfeiture A/c	Dr.		4,400
	To Capital Reserve A/c				4,400
	(Balance in Share Forfeiture Account of 1,300 re-issued shares transferred to Capital Reserve)

 

As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows.

Max Ltd.
Balance Sheet
Particulars	Note No.	Amount  ( `)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	19,94,400
b. Reserves and Surplus	2	4,00,600
2. Non-Current Liabilities
3. Current Liabilities
Total		23,95,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	23,95,000
Total		23,95,000

 

NOTES TO ACCOUNTS

Note No.	Particulars		Amount ( `)
1	Share Capital
	Authorised Share Capital
	……. Equity Shares of  ` 10 each		-
	Issued Share Capital
	2,00,000 Equity Shares of  ` 10 each		20,00,000
	Subscribed, Called-up and Paid-up Share Capital
	1,98,200 Equity Shares of  ` 10 each	19,82,000
	Add: Shares Forfeited (600 shares ×  ` 6.66)	4,000
	Add: Shares Forfeited (1,200 shares ×  ` 7)	8,400	19,94,400
2	Reserves and Surplus
	Securities Premium	3,96,200
	Capital Reserve	4,400	4,00,600
3	Cash and Cash Equivalents
	Cash at Bank		23,95,000

 

Working Notes:

1. 1,200 shares of Category (ii)

Number of share allotted = 60,000/80,000 ×1,200=900shares

Money received on application (1,200 shares ×  ` 5)	=	6,000
Less: Application money transferred to Share Capital (900 shares ×  ` 5)	=	4,500
Excess money received from 1,200 shares on Application	=	1,500

 

Money due on Allotment (900 shares ×  ` 4)	=	3,600
Less: Excess money on Application	=	1,500
Calls-in-Arrears on Allotment of category (ii)		2,100

2. Share Allotment

Money due on Allotment (2,00,000 shares ×  ` 4)	=	8,00,000
Less: Excess money on Application	=	2,00,000
Less: Calls-in-Arrears 1,000 shares of category (i) (1,000 shares ×  ` 4)	=	4,000
Less: Calls-in-Arrears 1,200 shares of category (ii)	=	2,100
Money received on Allotment	=	5,93,900

3. Share First Call

First Call due on 2,00,000 shares ×  ` 2	=	4,00,000
Less: Calls-in-Arrears on 3,100 shares ×  ` 2 (1,000 + 900 + 1,200 shares of category (i), (ii) and (iii) respectively)		(6,200)
Money received on First Call		3,93,800

4. Share Final Call

Money due on Share Final Call (2,00,000 – 1900) ×  ` 1	=	1,98,100
Less: Calls-in-Arrears of 1,200 shares of Category (iii)		1,200
Money received on Final Call		1,96,900

Capital Reserve

Calculation of Share Forfeiture of 1,000 shares of category (i) 

Share Forfeiture	` 5,000	Cr.
Less: Share Forfeiture	` 2,000	Dr.
Capital Reserve of 1,000 shares (balance after re-issue)	` 3,000	Cr.

Calculation of Share Forfeiture of 300 shares of category (ii)

Share Forfeiture = 6,000/900 Credit	=	`	6.67	per share
Less: Share Forfeiture Debit	=	`	2	per share
Capital Reserve (balance after re-issue)	=	`	4.67	per share

Capital Reserve of 300 shares = Capital Reserve (per share) × No. of shares re-issued =  ` 4.67 × 300 shares =  ` 1,400

Total Capital Reserve of 1,300 shares = Capital Reserve of 1,000 shares of category (i) + Capital Reserve of 300 shares of category (ii) = 3,000 + 1,400 =  ` 4,400

 

Page No 8.126:

Question 91:

XYZ Ltd . issued a prospectus inviting applications for 2,000 shares of  ` 10 each at a premium of  ` 4 per share , payable as:
                 

On application	--	` 6 (including  ` 1 premium)
On allotment	--	` 2 (including  ` 1 premium)
On first  call	--	` 3 (including  ` 1 premium)
On second and final call	--	` 3 (including  ` 1 premium)

Applications were received for 3,000 shares and pro rata allotment was made on the applications for  2,400 shares. It was decided to utilise excess application money towards the amount due on allotment .

X, to whom 40 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call , his shares were forfeited.

Y, who applied for 72 shares failed to pay the two calls and on his such failure , his shares were forfeited. 

Of the shares forfeited , 80 shares were sold to Z credited as fully paid-up for   ` 9 per share , the whole of Y's shares being included . Prepare Journal , Cash Book and the Balance Sheet .

Answer:

Applied shares 3,000

Allotment made as:				Payable as:
Applied		Allotted		Application	` 6	(5 + 1)
2,400		2,000		Allotment	` 2	(1 + 1)
600		NIL		First Call	` 3	(2 + 1)
				Final Call	` 3	(2 + 1)
3,000		2,000			` 14	(10 + 4) per share

 

Cash Book
Dr.					Cr.
Date	Particulars	Bank  `	Date	Particulars	Bank  `
	Share Application	18,000		Share Application	3,600
	(3,000 shares ×  ` 6)			(600 shares ×  ` 6)
	Share Allotment (see note-2)	1,568
	Share First Call (see note-4)	5,700
	Share Final Call (see note-5)	5,700
	Share Capital	720		Balance c/d	28,088
	(80 shares ×  ` 9)
		31,688			31,688

 

Journal Entries
Date	Particulars		L.F.	Debit Amount  `	Credit Amount  `
	Share Application A/c	Dr.		14,400
	To Share Capital A/c				10,000
	To Securities Premium A/c				2,000
	To Share Allotment A/c				2,400
	(Share application money of 2,000 shares transferred to Share Capital and Securities Premium at  ` 5 and Re 1 each respectively and  ` 2,400 adjusted on allotment)
	Share Allotment A/c	Dr.		4,000
	To Share Capital A/c				2,000
	To Securities Premium A/c				2,000
	(Allotment due on 2,000 shares at  ` 2 each including Re 1 premium)
	Share First Call A/c	Dr.		6,000
	To Share Capital A/c				4,000
	To Securities Premium A/c				2,000
	(First call due on 2,000 shares at  ` 3 each including Re 1 premium)
	Share Capital A/c (40 shares ×  ` 8)	Dr.		320
	Securities Premium A/c	Dr.		72
	To Share Forfeiture A/c				240
	To Share Allotment A/c				32
	To Share First Call A/c				120
	(40 shares of  ` 10 each  ` 8 called with premium forfeited for non-payment of amount due)
	Share Final Call A/c	Dr.		5,880
	To Share Capital A/c				3,920
	To Securities Premium A/c				1,960
	(Final call due on 1,960 shares at  ` 3 each including Re 1 premium)
	Share Capital A/c	Dr.		600
	Securities Premium A/c	Dr.		120
	To Share Forfeiture A/c				360
	To Share First Call A/c				360
	(60 shares forfeited for non-payment of amount due)
	Bank A/c	Dr.		720
	Share Forfeiture A/c	Dr.		80
	To Shares Capital A/c				800
	(80 shares of  ` 10 each re-issued at  ` 9 per share fully paid-up)
	Share Forfeiture A/c	Dr.		400
	To Capital Reserve				400
	(Balance of 80 reissued shares in Share Forfeiture Account transferred to Capital Reserve)

 

As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows.

XYZ Ltd.
Balance Sheet
Particulars	Note No.	Amount  ( `)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	19,920
b. Reserves and Surplus	2	8,168
2. Non-Current Liabilities
3. Current Liabilities
Total		28,088
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	28,088
Total		28,088

 

NOTES TO ACCOUNTS

Note No.	Particulars		Amount ( `)
1	Share Capital
	Authorised Share Capital
	……. shares of  ` 10 each		-
	Issued Share Capital
	2,000 shares of  ` 10 each		20,000
	Subscribed, Called-up and Paid-up Share Capital
	1,980 shares of  ` 10 each	19,800
	Add: Shares Forfeited (20 shares ×  ` 6)	120	19,920
2	Reserves and Surplus
	Securities Premium	7,768
	Capital Reserve	400	8,168
3	Cash and Cash Equivalents
	Cash at Bank		28,088

 

Working Notes:

1. X’s Shares

Number of share applied by X =2,400/2,000×40=48 Shares

Money received on application (48 shares ×  ` 6)	=	288
Less: Money transferred to Shares Capital (40 shares ×  ` 5)	=	200
Less: Securities Premium (40 shares × Re 1)	=	40
Excess money on application from X	=	48
Utilisation of excess application money received from X
Share Capital due on Allotment (40 shares × Re 1)	=	40
Less: Excess money on Application from X	=	48
Excess money after adjustment of Share Capital on Allotment	=	8
Securities Premium due on Allotment (40 shares × Re 1)	=	40
Less: Excess money after adjustment of Share Capital on  Allotment	=	8
Calls-in-Arrears of Securities Premium on  Allotment	=	32

2. Share Allotment 

Money due on allotment (2,000 shares ×  ` 2)	=	4,000
Less: Excess money on Application	=	2,400
	=	1,600
Less: Calls-in-Arrears on X‘s shares (securities premium)	=	32
Money received on allotment	=	` 1,568

3. Y’s Shares 

Number of shares allotted =2,000/2,400×72= 60 shares

4. Share First Call 

Money due on Share First Call (2,000 shares ×  ` 3)	=	6,000
Less: Calls-in-Arrears on X‘s shares (40 shares ×  ` 3)	=	120
Less: Calls-in-Arrears on Y’s shares (60 shares ×  ` 3)	=	180
Money received on Share First Call	=	5,700

5. Share Final Call 

Money due on share Final Call (1,960 shares ×  ` 3)	=	5,880
Less: Calls-in-Arrears on Y’s shares (60 shares ×  ` 3)	=	180
Money received on Share Final Call	=	5,700

Capital Reserve

X’s shares

Money received from X for 40 shares	=	288
Less: Securities Premium adjusted on Application	=	40
Less: Securities Premium adjusted on Allotment	=	8
Balance in the Share Forfeiture  before re-issue of shares Cr.		240

 

Share Forfeiture Credit =240/40	=	`	6	per share
Share forfeiture Debit	=	`	1	per share
		`	5	per share

Capital Reserve on re-issue of 20 shares =  ` 5 × 20 shares =  ` 100

Y’s Shares

Share Forfeiture on 60 Shares of Y

Share Forfeiture Credit	` 6	per share
Less: Share Forfeiture Debit	` 1	per share
	` 5	per share

Capital Reserve on re-issue of 60 shares of Y =  ` 5 × 60 shares =  ` 300

Total Capital Reserve on 80 shares = Capital Reserve on re-issue of 20 shares of X + Capital Reserve on re-issue of 60 shares of Y = 100 + 300 =  ` 400

 

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