Question

Ambuja Ltd. issued for public subscription 2,00,000 equity shares of ₹20 each at a premium of ₹10 per share payable as under:
On Application ₹10
On Allotment ₹14 (including premium ₹10)
On First & Final Call ₹6
Applications were received for 3,00,000 shares. Allotment was made on pro-rata basis and excess application money was adjusted towards allotment. Pooja, who applied for 3,600 shares, failed to pay allotment and call money and her shares were forfeited. Two-third of the forfeited shares were re-issued to Sandeep as fully paid-up at ₹16 per share. Pass the necessary journal entries.

Hint:

Discount on re-issue of forfeited shares cannot exceed the amount originally forfeited on those shares.

Answer 1

Step 1: Calculation of Pro-rata Allotment Shares applied for = 3,00,000 Shares issued = 2,00,000 Ratio = 2 : 3 Pooja applied for 3,600 shares Shares allotted to Pooja: \[ 3,600 \times \frac{2}{3} = 2,400 \text{ shares} \] Step 2: Amount Due from Pooja Allotment due per share = ₹14 Call due per share = ₹6 Total unpaid per share = ₹20 \[ 2,400 \times 20 = ₹48,000 \] (i) Forfeiture of Shares Journal Entry Share Capital A/c Dr. ₹48,000
Securities Premium A/c Dr. ₹24,000
To Share Allotment A/c ₹33,600
To Share First & Final Call A/c ₹14,400
To Share Forfeiture A/c ₹24,000 
(ii) Re-issue of Two-third Forfeited Shares Shares re-issued: \[ 2,400 \times \frac{2}{3} = 1,600 \text{ shares} \] Discount on re-issue per share: \[ 20 - 16 = ₹4 \] Total discount: \[ 1,600 \times 4 = ₹6,400 \] Journal Entry Bank A/c Dr. ₹25,600
Share Forfeiture A/c Dr. ₹6,400
To Share Capital A/c ₹32,000 
(iii) Transfer of Balance in Share Forfeiture Account Forfeiture on re-issued shares: \[ 1,600 \times \frac{24,000}{2,400} = ₹16,000 \] Balance transferred to Capital Reserve: \[ 16,000 - 6,400 = ₹9,600 \] Journal Entry Share Forfeiture A/c Dr. ₹9,600
To Capital Reserve A/c ₹9,600