Question

Alexia Limited invited applications for issuing 1,00,000 equity shares of Rs 10 each at premium of Rs 10 per share. The amount was payable as follows: On application Rs 9 per share (Including premium Rs 6 per share); On allotment Rs 8 per share (Including premium Rs 4 per share); On first and final call Rs 3 per share. Applications were received for 1,50,000 equity shares and allotment was made to the applicants as follows: Category A: Applicants for 90,000 shares were allotted 70,000 shares. Category B: Applicants for 60,000 shares were allotted 30,000 shares. Excess money received on application was adjusted towards allotment and first and final call. Shekhar, who had applied for 1200 shares failed to pay the first and final call. Shekhar belonged to category B. Pass necessary journal entries for the above transactions in the books of Alexia Limited. Open calls in arrears and calls in advance account, wherever necessary.

Hint:

For Pro-rata Allotment: Carefully track excess application money. Adjust it against allotment first. If excess still remains AND allowed, transfer to Calls in Advance. Calculate arrears considering any advance paid by the defaulter. For Forfeiture: Debit Share Capital with Called-up Face Value, Debit Securities Premium if unpaid, Credit Share Forfeiture with amount paid towards face value, Credit unpaid call accounts. For Reissue: Debit Bank with amount received, Credit Share Capital with paid-up value. Difference is discount (Dr Share Forfeiture) or premium (Cr Securities Premium). Transfer gain [(Forfeited Amt per share - Discount per share) x No. of shares reissued] from Share Forfeiture to Capital Reserve.

Answer 1

Solution: Journal Entries

1. For Receipt of Application Money

Bank A/c Dr. 13,50,000 To Share Application A/c 13,50,000 (Being application money received for 1,50,000 shares at Rs 9 per share)

2. For Allotment of Shares

Share Application A/c Dr. 13,50,000 To Share Capital A/c 10,00,000 To Share Premium A/c 3,00,000 (Being shares allotted: 1,00,000 shares at Rs 10 per share, Rs 6 premium)

3. For Adjustment of Excess Application Money

Share Application A/c Dr. 5,00,000 To Share Allotment A/c 4,00,000 To Share Premium A/c 1,00,000 (Being excess application money adjusted towards allotment of Rs 4 per share and premium of Rs 1 per share)

4. For Receipt of Allotment Money

Bank A/c Dr. 8,00,000 To Share Allotment A/c 8,00,000 (Being allotment money received for 1,00,000 shares at Rs 8 per share)

5. For Receipt of First and Final Call Money

Bank A/c Dr. 3,00,000 To Share First and Final Call A/c 3,00,000 (Being first and final call money received for 1,00,000 shares at Rs 3 per share)

6. For Shekhar’s Default in Paying First and Final Call

Share First and Final Call A/c Dr. 3,600 To Calls in Arrears A/c 3,600 (Being Shekhar's unpaid first and final call for 1,200 shares at Rs 3 per share)

7. For Transfer to Calls in Arrears and Advance (if applicable)

No further entry is required for Calls in Advance as no amount is being received in advance, and only calls in arrears are being recorded for Shekhar's default.