Question

Radhika Ltd. invited applications for issuing 40,000 equity shares of ₹ 100 each at a premium of ₹ 50 per share. The amount was payable as follows:
On Application and Allotment – ₹ 40 per share (including ₹ 10 premium)
On First call – ₹ 45 per share (including ₹ 5 premium)
On Second and final call – Balance
Applications for 39,000 shares were received. Allotment was made in full to all the applicants. Dinu, to whom 100 shares were allotted, failed to pay the first call money. His shares were immediately forfeited. The forfeited shares were re-issued thereafter at ₹ 70 per share fully paid up. The second and final call was not yet made. Pass necessary journal entries for the above transactions in the books of Radhika Ltd.

Hint:

Profit on reissue = Reissue price + forfeited amount – face value of shares.

Answer 1

Journal Entries in the books of Radhika Ltd.

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c     To Equity Share Application and Allotment A/c (Application and allotment for 39,000 shares @ ₹ 40)	15,60,000	15,60,000
Equity Share Application and Allotment A/c     To Equity Share Capital A/c     To Securities Premium A/c (Allotment transferred to share capital and premium)	15,60,000	11,70,000 3,90,000
Bank A/c     To First Call A/c (First call received on 38,900 shares @ ₹ 45)	17,55,000	17,55,000
Equity Share Capital A/c Securities Premium A/c     To Forfeited Shares A/c     To First Call A/c (Forfeiture of 100 shares for non-payment of first call)	11,500 500	12,000 4,500
Bank A/c Forfeited Shares A/c     To Equity Share Capital A/c (Reissue of 100 forfeited shares @ ₹ 70 fully paid up)	7,000 5,000	12,000
Forfeited Shares A/c     To Capital Reserve A/c (Profit on reissue transferred to capital reserve)	7,000	7,000

Calculation:
Amount received on reissue = ₹ 70 × 100 = ₹ 7,000
Total amount forfeited = ₹ 12,000
Loss on reissue = ₹ 5,000
Profit = ₹ 7,000 transferred to capital reserve.