A share of Rs. 10. Issued at a premium of Rs. 3. On which Rs. 3 was payable on application and Rs. 5 was payable on allotment including premium. A shareholder who had applied for 100 shares was Allotted Only 50 Shares and due to non payment of allotment his shares were forfeited. In this case the amount to be debited to securities premium A/c on forfeiture of these shares are:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs.100.
On forfeiture, Securities Premium Reserve is debited with the premium not received. Here the premium is part of the allotment money, and the excess application money on the shares not allotted is adjusted towards allotment.
Application money received = 100 × Rs. 3 = Rs. 300
Needed on application for 50 shares = 50 × Rs. 3 = Rs. 150
Excess adjusted towards allotment = Rs. 300 − Rs. 150 = Rs. 150
Allotment due = 50 × Rs. 5 = Rs. 250 (premium 50 × Rs. 3 = Rs. 150 and capital 50 × Rs. 2 = Rs. 100)
Allotment money unpaid = Rs. 250 − Rs. 150 = Rs. 100
Premium treated as not received = Rs. 100, debited to Securities Premium on forfeiture
Rs. 150 would be the full premium; it ignores the Rs. 150 already adjusted from the excess application money.
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