Question

Qumtan Ltd. invited applications for issuing 1,00,000 equity shares of \rupee10 each at a premium of \rupee6 per share. The amount was payable as follows: On Application and Allotment: \rupee8 per share (including premium \rupee3). On First and Final Call: Balance (including premium). Applications for 1,60,000 shares were received. Applications for 10,000 shares were rejected, and pro-rata allotment was made to the remaining applicants. Excess money received on application was returned. Dheeraj, who was allotted 200 shares, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were reissued at \rupee5 per share fully paid up. \vspace{0.5cm}

Hint:

In the case of forfeited shares, any amount already paid is credited to the Forfeited Shares Account. Upon reissue, the surplus (if any) is transferred to the Capital Reserve.

Answer 1

\[ \text{Journal Entries in the Books of Qumtan Ltd.} \] \begin{center} \begin{tabular}{|p{3cm}|p{9cm}|p{3cm}|} \hline Date & Particulars & Amount (\rupee)
\hline 2023 & Bank A/c Dr. & 12,80,000
& To Equity Share Application and Allotment A/c & 12,80,000
& \multicolumn{2}{|l|}{(Being application money received on 1,60,000 shares at \rupee8 each)}
\hline 2023 & Equity Share Application and Allotment A/c Dr. & 12,80,000
& To Equity Share Capital A/c & 5,00,000
& To Securities Premium A/c & 3,00,000
& To Bank A/c (Excess Refund) & 4,80,000
& \multicolumn{2}{|l|}{(Being transfer of application and allotment money to capital and premium)}
\hline 2023 & Bank A/c Dr. & 4,00,000
& To Equity Share First and Final Call A/c & 4,00,000
& \multicolumn{2}{|l|}{(Being first and final call money received except for 200 shares of Dheeraj)}
\hline 2023 & Equity Share First and Final Call A/c Dr. & 3,200
& To Equity Share Capital A/c & 2,000
& To Securities Premium A/c & 1,200
& \multicolumn{2}{|l|}{(Being transfer of unpaid amount of first and final call for 200 shares of Dheeraj)}
\hline 2023 & Equity Share Capital A/c Dr. & 2,000
& Securities Premium A/c Dr. & 1,200
& To Forfeited Shares A/c & 800
& To Equity Share First and Final Call A/c & 2,400
& \multicolumn{2}{|l|}{(Being 200 shares forfeited due to non-payment of first and final call)}
\hline 2023 & Bank A/c Dr. & 1,000
& Forfeited Shares A/c Dr. & 1,000
& To Equity Share Capital A/c & 2,000
& \multicolumn{2}{|l|}{(Being forfeited shares reissued at \rupee5 per share fully paid up)}
\hline 2023 & Forfeited Shares A/c Dr. & 800
& To Capital Reserve A/c & 800
& \multicolumn{2}{|l|}{(Being profit on reissue transferred to Capital Reserve)}
\hline \end{tabular} \end{center} \vspace{0.5cm} Explanation: 1. Application Money Received: Total money received on application is for 1,60,000 shares at \rupee8 each. 2. Excess Refund: After adjusting for pro-rata allotment, the excess application money for 10,000 shares is refunded. 3. First and Final Call: \rupee4 per share (including \rupee3 as premium) was due but unpaid for 200 shares of Dheeraj. 4. Forfeiture of Shares: Dheeraj's shares are forfeited, transferring the unpaid amounts from the Securities Premium and Share Capital accounts. 5. Reissue of Shares: The forfeited shares are reissued at \rupee5 per share, and the profit is transferred to the Capital Reserve account.