Question

Ritu Ltd. forfeited 2,000 shares of ₹20 each issued at 10% premium to Neeru (₹18 called up) on which he did not pay ₹6 of allotment (including premium) and first call of ₹4. Out of these, 1,200 shares were re-issued to Goldy as fully paid up for ₹16 per share. Give journal entries for forfeiture and re-issue of shares.

Hint:

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

Answer 1

(i) Forfeiture of 2,000 shares Face Value = ₹20 Issue Price = ₹22 (including 10% premium) Amount called up = ₹18 per share Unpaid amount: Allotment (including premium) = ₹6 First Call = ₹4 \[ \text{Total unpaid per share} = 6 + 4 = ₹10 \] \[ \text{Total unpaid amount} = 2,000 \times 10 = ₹20,000 \] Journal Entry Share Capital A/c Dr. ₹36,000
Securities Premium A/c Dr. ₹4,000
To Share Allotment A/c ₹12,000
To Share First Call A/c ₹8,000
To Share Forfeiture A/c ₹20,000 
(ii) Re-issue of 1,200 shares at ₹16 each as fully paid Discount on re-issue per share: \[ 20 - 16 = ₹4 \] \[ \text{Total discount} = 1,200 \times 4 = ₹4,800 \] Journal Entry Bank A/c Dr. ₹19,200
Share Forfeiture A/c Dr. ₹4,800
To Share Capital A/c ₹24,000 
(iii) Transfer of balance in Share Forfeiture Account Forfeiture on re-issued shares: \[ 1,200 \times \left( \frac{20,000}{2,000} \right) = ₹12,000 \] Balance to be transferred to Capital Reserve: \[ 12,000 - 4,800 = ₹7,200 \] Journal Entry Share Forfeiture A/c Dr. ₹7,200
To Capital Reserve A/c ₹7,200