Surya limited invited applications for 15,000 shares for ₹10 each at a premium of 20% per share. The amount was payable as under:
On application ₹4 On allotment ₹6
On first call ₹1 On final call-Balance
Applications were received for 36,000 shares and pro-rata allotment was made to all the applicants. Directors have not made the final call. Mr. Ritesh the holder of 300 shares did not pay anything after application money. Directors forfeited these shares and re-issued them at ₹6 per share.
On the basis of following case, answer the Question.
At the time of forfeiture of share journal entry would be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) -
Securities Premium Reserve A/c Dr. ₹120
Share capital A/c Dr. ₹2,700
To Share Allotment A/c ₹120
To Share Ist Call A/c ₹300
To Share forfeiture A/c ₹2,400
Pro-rata ratio = 12:5
Those alloted 15,000 shares applied for 36,000 shares.
Ritesh alloted 300 shares
Ritesh applied for = 36,000/15,000 x 300
= 720 shares.
On application ₹4
On allotment ₹6
Money received from Ritesh = 720 x 4
= ₹2,880
Money on application needed = 300 x 4
= ₹1,200
Excess money adjusted towards allotment = 2,880 - 1,200
= ₹1680
Money due on allotment = 300 x 6
= ₹1,800
Money not received on allotment = Money due on allotment - Excess money adjusted
= 1,800 - 1,680
= ₹120
* Money not received on allotment is to be for securities premium reserve account.
Share Capital A/c Dr. (300 x 9) ₹2,700
Securities Premium Reserve A/c Dr. ₹120
To Share Forfeiture A/c ₹2,400 (Amount received)
To Share Allotment A/c ₹1,20 (Amount not received)
To Share First call A/c ( 300 x 1) ₹300 (Amount not received)
(300 shares forfeited for non-payment of allotment money and calls made)