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:

In pro-rata allotment with excess application money adjustment: 1. Calculate excess money per category/shareholder. 2. Adjust excess towards allotment due. 3. If excess still remains after allotment, check if it should be refunded or adjusted towards calls (Calls-in-Advance). 4. When calculating Calls-in-Arrears for a defaulting shareholder from a pro-rata category, deduct any excess application money already adjusted towards the call amount due from them.

Answer 1

Working Notes:
1. Pro-rata Ratio (Category B):
Applied : Allotted = 60,000 : 30,000 = 2 : 1.
Shekhar applied for 1,200 shares (Category B).
Shekhar's Allotted Shares = \( 1,200 \times \frac{1}{2} = 600 \) shares.
2. Application Money Analysis (Shekhar - Cat B):
Application money paid by Shekhar = 1,200 shares \( \times \) Rs 9/share = Rs 10,800.
Application money required for allotted shares = 600 shares \( \times \) Rs 9/share = Rs 5,400.
Excess Application Money (Shekhar) = Rs 10,800 - Rs 5,400 = Rs 5,400.
3. Allotment Money Due (Shekhar):
Allotment money due = 600 shares \( \times \) Rs 8/share = Rs 4,800.
Adjustment of Excess Application Money = Rs 4,800 (Since Excess Rs 5,400 > Due Rs 4,800).
Balance Excess after Allotment Adjustment = Rs 5,400 - Rs 4,800 = Rs 600.
This Rs 600 is Calls-in-Advance for Shekhar towards the first and final call.
4. First \& Final Call Money Due (Shekhar):
First \& Final Call due = 600 shares \( \times \) Rs 3/share = Rs 1,800.
Adjustment from Calls-in-Advance = Rs 600.
Net Amount Due from Shekhar on Call = Rs 1,800 - Rs 600 = Rs 1,200.
Shekhar failed to pay this amount. Calls-in-Arrears (Shekhar) = Rs 1,200.
5. Overall Application Money Analysis:
Total Application Money Received = 1,50,000 shares \( \times \) Rs 9 = Rs 13,50,000.
Total Application Money Required (for 1,00,000 allotted shares) = 1,00,000 \( \times \) Rs 9 = Rs 9,00,000.
Total Excess Application Money = Rs 13,50,000 - Rs 9,00,000 = Rs 4,50,000.
6. Overall Allotment Money Due:
Total Allotment Money Due = 1,00,000 shares \( \times \) Rs 8 = Rs 8,00,000.
Excess Application money available for allotment = Rs 4,50,000.
Amount Received on Allotment = Total Due - Excess Application Money Adjusted = Rs 8,00,000 - Rs 4,50,000 = Rs 3,50,000.
*(Assumption: No other default on allotment besides excess adjustment available).*
7. Overall First \& Final Call Money Due:
Total Call Money Due = 1,00,000 shares \( \times \) Rs 3 = Rs 3,00,000.
Total Calls-in-Advance from Application Excess = Rs 600 (Only Shekhar's case specified adjustment to call). Let's verify Cat A. Cat A: Applied 90k, Allotted 70k. Excess shares = 20k. Excess Money = 20k * 9 = 1.8L. Allotment Due = 70k * 8 = 5.6L. Excess money (1.8L) fully adjusted on allotment. So, only Shekhar's excess Rs 600 goes to Calls-in-Advance.
Total Calls-in-Arrears = Rs 1,200 (Shekhar).
Amount Received on Call = Total Due - Calls-in-Advance - Calls-in-Arrears
Amount Received = Rs 3,00,000 - Rs 600 - Rs 1,200 = Rs 2,98,200.
Journal Entries in the books of Alexia Limited
\begin{longtable}{|p{1.5cm}|p{8cm}|r|r|} \hline Date & Particulars & Dr. (Rs) & Cr. (Rs)
\hline \endfirsthead \hline \endfoot \hline \endlastfoot (i) & Bank A/c \hspace{5.3cm} Dr. & 13,50,000 &
& \indent To Equity Share Application A/c & & 13,50,000
& \textit{(Being application money received for 1,50,000 shares @ Rs 9 each)} & &
\hline (ii) & Equity Share Application A/c \hspace{1.8cm} Dr. & 13,50,000 &
& \indent To Equity Share Capital A/c (1L shares x Rs3) & & 3,00,000
& \indent To Securities Premium A/c (1L shares x Rs6) & & 6,00,000
& \indent To Equity Share Allotment A/c (Excess adjusted) & & 4,50,000
& \indent To Calls-in-Advance A/c (Shekhar's excess beyond allotment) & & 600
& \textit{(Being application money adjusted on allotment, excess transferred to allotment and calls-in-advance)} & &
\hline (iii) & Equity Share Allotment A/c \hspace{2.0cm} Dr. & 8,00,000 &
& \indent To Equity Share Capital A/c (1L shares x Rs4) & & 4,00,000
& \indent To Securities Premium A/c (1L shares x Rs4) & & 4,00,000
& \textit{(Being allotment money due on 1,00,000 shares @ Rs 8 each)} & &
\hline (iv) & Bank A/c \hspace{5.3cm} Dr. & 3,50,000 &
& \indent To Equity Share Allotment A/c & & 3,50,000
& \textit{(Being balance allotment money received [8,00,000 - 4,50,000])} & &
\hline (v) & Equity Share First and Final Call A/c \hspace{0.5cm} Dr. & 3,00,000 &
& \indent To Equity Share Capital A/c (1L shares x Rs3) & & 3,00,000
& \textit{(Being first and final call money due on 1,00,000 shares @ Rs 3 each)} & &
\hline (vi) & Bank A/c \hspace{5.3cm} Dr. & 2,98,200 &
& Calls-in-Advance A/c \hspace{2.9cm} Dr. & 600 &
& Calls-in-Arrears A/c (Shekhar) \hspace{1.5cm} Dr. & 1,200 &
& \indent To Equity Share First and Final Call A/c & & 3,00,000
& \textit{(Being first and final call money received, advance adjusted and Shekhar's arrears recorded)} & &
\hline \end{longtable}