Practical Problem 08
Practical problem | Q 8 | Page 342
Pass Journal entries for the forfeiture and re-issue of shares in the following cases.
A) Asha Ltd. forfeited 100 equity shares of ₹ 20 each fully called up for non-payment of first call of ₹ 3 per share and final call of ₹ 5 per share. 80 shares of these were reissued at ₹ 15 per share fully paid
B) Bhakti Ltd. forfeited 100 equity shares of ₹ 10 each, ₹ 6 called-up on which the shareholder paid application and allotment of ₹ 5 per share. Of these 80 shares were re-issued as fully paid-up for 16 per share.
C) Konark Ltd. forfeited 50 shares of ₹ 10 each, ₹ 8 called-up. The shareholder failed to pay first call of ₹ 3 per share. Later on 30 shares of these were re-issued at ₹ 7 per share.
SOLUTION:
Journal Entries [For Asha Ltd.] | ||||
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
(A)(i) | Equity Share Capital A/c……………………………………………. Dr | 2,000 | ||
To Equity Share First Call A/c | 300 | |||
To Equity Share Final Call A/c | 500 | |||
To Equity Share Forfeiture A/c | 1,200 | |||
( Being forfeiture of 100 equity shares due to non-payment of first call @ ₹3 and final call @ ₹5 per share) | ||||
(ii) | Bank A/c…………………………………………………………………… Dr | 1,200 | ||
Equity Share Forfeiture A/c ……………………………………….Dr | 400 | |||
To Equity Share Capital A/c | 1,600 | |||
( Being re-issue of 80 forfeited shares @ ₹15 per share as fully paid-up) | ||||
(iii) | Equity Share Forfeiture A/c………………………………………. Dr | 560 | ||
To Capital Reserve A/c | 560 | |||
( Being proportion balance of Share Forfeiture A/c transferred to Capital Reserve A/c) | ||||
4160 | 4160 | |||
Working Notes: For A :
(1) Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited and credited.
(2) To find the proportionate amount for Forfeiture A/c:
For 100 shares – share forfeiture amount = ₹ 1,200
∴ 80 shares – share forfeiture amount =? = ₹ 960
Now, out of this ₹ 960 we used ₹ 400 from Share Forfeiture A/c at the time of re-issue of shares. So, balance of Share Forfeiture A/c = ₹ 960 – ₹ 400 = ₹ 560
Journal Entries [For Bhakti Ltd.] | ||||
Date | Particulars | L.F | Debit Amount (₹ ) | Credit Amount (₹ ) |
(B)(i) | Equity Share Capital A/c (100 × ₹ 6)………………………… Dr | 600 | ||
To Calls-in-Arrears A/c | 100 | |||
To Equity Share Forfeiture A/c (100 × ₹ 5) | 500 | |||
(Being forfeiture of 100 equity share due to non payment of ₹ 100) | ||||
(ii) | Bank A/c (80 × ₹ 6)…………………………………………………. Dr | 480 | ||
To Equity Share Capital A/c | 480 | |||
( Being re-issue of 80 forfeited shares @ ₹ 6 per share as fully paid up) | ||||
(iii) | Equity Share Forfeiture A/c…………………………………….. Dr | 400 | ||
To Capital Reserve A/c | 400 | |||
( Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c) | ||||
1480 | 1480 | |||
Working Notes: For B :
(1) Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited for ₹ 600 and credited for ₹ 480.
(2) The proportionate amount debited to Forfeiture A/c :
For 100 shares – share forfeiture amount debited = ₹ 500 |
∴ 80 shares – share forfeiture amount =? = ₹ 400 |
∴ (80 x 500) / 100 = ₹ 400
Now, shares were re-issued at ₹ 16 per share which is the called-up amount.
∴ Proportionate amount for Forfeiture A/c ₹ 400 will be transferred to Capital Reserve A/c.
Journal Entries [For Konark Ltd.] | ||||
Date | Particulars | L.F | Debit Amount (₹ ) | Credit Amount (₹ ) |
(c)(i) | Equity Share Capital A/c (50 × ₹ 8) ……………………Dr | 400 | ||
To Equity Share First Call A/c (50 × ₹ 3) | 150 | |||
To Equity Share Forteifure A/c | 250 | |||
( Being forfeiture of 50 equity shares due to non-payment of first call @ ₹ 3 per share) | ||||
(ii) | Bank A/c (30 × ₹ 7)…………………………………………… Dr | 210 | ||
Equity Share Forfeiture A/c ………………………………Dr | 30 | |||
To Equity Share Capital A/c (30 × ₹ 8) | 240 | |||
( Being re-issue of 30 forfeited shares @ ₹ 7 per share) | ||||
(iii) | Equity Share Forfeiture A/c……………………………… Dr | 120 | ||
To Capital Reserve A/c | 120 | |||
( Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c) | ||||
760 | 760 | |||
Working Note: For C :
The proportionate amount debited to Forfeiture A/c :
For 50 shares – share forfeiture amount debited is ₹ 250 |
∴30 shares – share forfeiture amount =? = ₹ 150 |
∴ (30 x 250) / 50 = ₹ 150
Out of this ₹ 30 used for re-issue of forfeited shares.
∴ Balance of Share Forfeiture A/c = ₹ 150 – ₹ 30 = ₹ 120.