Read the following passage and answer the following questions.

BCD Ltd. invited applications for 1,00,000 shares of ₹10 each which is payable as follows-
Application - ₹2
Allotment - ₹3
First and final Call - Balance amount

Applications for 3,00,000 shares is received by the company. Company made pro-rata on the all applicants and adjust excess money towards allotment only. Mr. A shareholder who had applied for 3,000 shares failed to pay call money due to which company forfeited his shares and reissued at ₹8 per share as fully paid.

How much amount will be transferred to the capital reserve?

₹3,000

The correct answer is option 3- ₹3,000

No. of shares applied = 3,000
Who applied for 3,00,000 got 1,00,000 shares.
So, Mr. A allotted = 1,00,000/3,00,000 x 3,000
                           = 1,000 shares.

Application paid = 3,000 × ₹2 = ₹6,000

Required application = 1,000 × ₹2 = ₹2,000

Excess Money available for Allotment: $₹6,000-₹2,000=₹4,000$

Allotment Due (on 1,000 shares): $1,000\times ₹3=₹3,000$

Since the excess money (₹4,000) is more than the allotment due (₹3,000), Mr. A has fully paid his Allotment. The remaining ₹1,000 of excess money would be refunded (as the problem states excess is adjusted towards allotment only).

Total amount forfeited (the amount Mr. A actually paid towards the share capital):

• Application (₹2,000) + Allotment (₹3,000) = ₹5,000

• Reissued at ₹8 (discount ₹2 per share)
• Discount = 1,000 × ₹2 = ₹2,000
• Capital Reserve: = Forfeited amount – Discount on reissue
  = ₹5,000 – ₹2,000 = ₹3,000

Journal entry for the forfeiture of shares of Mr. A is-
Share Capital A/c   Dr. (1,000 x 10) ₹10,000
          To Share first and final Call (1,000 x 5) ₹5,000
          To Share forfeiture A/c (1,000 x 5)        ₹5,000
(Forfeiture of 1,000 shares on which ₹5 is received and final call not received)

Journal entry for reissue of shares-
Bank A/c         Dr. (1,000x 8) ₹8,000
Share forfeiture A/c D. (1,000 x 2) ₹2,000
       To Share Capital A/c (1,000 x 10)    ₹10,000

Share forfeiture A/c Dr.    ₹3,000
       To Capital reserve A/c      ₹3,000