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.