Read the following passage and answer the question.
EFG Ltd. invited applications for 10,000 shares of ₹100 each at a premium of 10 each which is payable as follows-
Application - ₹50
Allotment - ₹35 including premium
Call - ₹25
Applications for 15,000 shares is received by the company. The company rejected the applications for 2,500 shares and made pro-rata on the remaining applicants. Mr. A shareholder who is allotted 400 shares failed to pay the allotment and call money due to which the company forfeited his shares and reissued at ₹105 per share.
What will be the journal entry for the reissue of shares?
Answer & explanation
Correct answer: option 4
The correct answer is option 4-
Bank A/c Dr. ₹42,000
To Share Capital A/c ₹40,000
To Securities Premium A/c ₹2,000
* Shares are reissued at ₹105 per shares means ₹5 is premium
Shares reissued = 400
Securities premium = 400 x 5
= ₹2,000
Total amount comes to business = 400 x 105
= ₹42,000
Amount goes to share capital = 400 x 100
= ₹40,000
So, the following journal entry is passed for the reissue of shares-
Bank A/c Dr. ₹42,000
To Share Capital A/c ₹40,000
To Securities Premium A/c ₹2,000