Read the passage given below carefully and answer the questions given below on the basis of the information.
Nidiya limited was incorporated on 1st April, 2017 with registered office in Mumbai. The capital clause of Memorandum of Association reflected a registered capital of 8,00,000 equity shares of ₹10 each and 1,00,000 preference shares of ₹50 each.
Since some large investments were required for building and machinery the company in consultation with vendors, Ms.VPS Enterprises, issued 1,00,000 equity shares and 20,000 preference shares at par to them in full consideration of assets acquired. Besides this the company issued 2,00,000 equity shares for cash at par payable as Rs 3 on application, 2 on allotment, 3 on first call and 2 on second call.
Till date second call has not yet been made and all the shareholders have paid except Mr. Ajay who did not pay allotment and calls on his 300 shares and Mr. Vipul who did not pay first call on his 200 shares. Shares of Mr. Ajay were then forfeited and out of them 100 shares were reissued at ₹12 per share.
What would be the amount of share forfeiture (shareholder Ajay) would be reflected in the balance sheet?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹600.
Journal Entry on Forfeiture of 300 shares of Ajay will be:
Share Capital A/c Dr 2,400 (300*8)
To, Share forfeiture A/c 900 (300*3)
To Share Allotment A/c 600 (300*2)
To Share First Call A/c 900 (300*3)
Journal Entry on reissue of 100 shares of Ajay Will be
Bank A/c Dr 1200 (100*12)
To Share Capital A/c 800 (100*8 being the share called up value)
To Share Premium A/c 400 (₹4 will be securities premium)
Share forfeiture balance on 300 shares = 900
Balance on 100 shares = 900/300 x 100
= 300
This 300 is capital profit of the company so transferred to capital reserve.
Remaining balance in share forfeiture = 900 - 300
= 600
This 600 is shown in the share forfeiture account in the balance sheet.