Technocrats Ltd. invited applications for 1,00,000 equity shares of ₹ 30 each. The shares were issued at a premium of ₹ 15 per share, payable as follows: On Application and Allotment : ₹ 24 per share (incl. premium of ₹

CS Executive · Corporate Accounting and Financial Management · PYQS · December 2023
Technocrats Ltd. invited applications for 1,00,000 equity shares of ₹ 30 each. The shares were issued at a premium of ₹ 15 per share, payable as follows: On Application and Allotment : ₹ 24 per share (incl. premium of ₹ 9) On first and final call : Balance including remaining premium Applications for 1,50,000 shares were received. Applicants of 10,000 shares were rejected on allotment, and pro-rata allotment was made to remaining applicants as follows: Category A — Applicants for 80,000 shares were allotted 60,000 shares Category B — Applicants for 60,000 shares were allotted 40,000 shares Mr. X, who belonged to A category, was allotted 300 shares. He failed to pay the call money. Mr. Y, who belonged to B category and applied for 300 shares, also failed to pay the call money. These shares were forfeited and reissued as fully paid @ ₹ 36 per share. Assume that the excess received on application is to be adjusted towards share capital account first. You are required: Pass the necessary journal entries to record the above transactions.

Answer & Explanation:

Journal Entries in the books of Technocrats Ltd. When excess application money utilized for payment of Share Capital: Date Particulars L.F. Amount Dr (₹) Amount Cr (₹) Bank A/c Dr. 36,00,000 To Share Application and Allotment A/c 36,00,000 (Being amount received on application) Share Application and Allot. A/c Dr. 26,40,000 To Share Capital A/c 15,00,000 To Securities Premium A/c 9,00,000 To Bank A/c 2,40,000 (Being application and allotment amount relating to 1,00,000 shares transferred to Share Capital account and Securities Premium account and application money on rejected applications returned back) Equity Share first and Final Call A/c Dr. 21,00,000 To Share Capital A/c 15,00,000 To Securities Premium A/c 6,00,000 (Being call money due on 1,00,000 shares) Bank A/c Dr. 11,34,300 Share Application and Allot. A/c Dr. 9,60,000 To Equity Share first and Final Call A/c 20,94,300 (Being Call money received and excess application and allotment money adjusted) Equity Share Capital A/c Dr. 15,000 Securities Premium A/c Dr. 3,000 To Equity Share first and Final Call A/c 5,700 To Share Forfeited A/c 12,300 (Being shares issued to X and Y forfeited for non-payment of call money and Calls in arrears account closed) Bank A/c Dr. 18,000 To Equity Share Capital A/c 15,000 To Securities Premium A/c 3,000 (Being forfeited shares reissued @ ₹ 36 each and relevant amounts transferred to Share Capital and Securities Premiums Accounts) Share Forfeited A/c Dr. 12,300 To Capital Reserve A/c 12,300 (Being unused Securities Premium Account transferred to Capital Reserve Account) Working Notes: 1. Calculation of Calls in Arrears: (i) On Mr. X's Shares: Amount due on call = 300 shares × ₹ 21 = ₹ 6,300 Amount Adjusted through Application and Allotment Money = (80,000 shares / 60,000 shares) × 300 shares × ₹ 24 = ₹ 9,600. Excess application money for Mr. X = (400 shares applied - 300 shares allotted) × ₹ 24 = ₹ 2,400. Call in Arrears = ₹ 6,300 - ₹ 2,400 = ₹ 3,900 (ii) On Mr. Y's Shares: Amount due on call = 200 shares × ₹ 21 = ₹ 4,200 Amount Adjusted through Application and Allotment Money = (60,000 shares / 40,000 shares) × 300 shares = 450 shares applied. Allotted 300 shares. Excess application money for Mr. Y = (450 shares applied - 300 shares allotted) × ₹ 24 = ₹ 3,600. However, the solution states (20000x300/60000)xRs.24 which is incorrect based on the problem statement. Assuming Mr. Y applied for 300 shares and was allotted 200 shares (as per B category ratio 60k:40k = 3:2, so for 300 applied, 200 allotted). Excess application money = (300 applied - 200 allotted) * 24 = 2400. Call in Arrears = ₹ 4,200 - ₹ 2,400 = ₹ 1,800 Total Calls in arrears = ₹ 3,900 + ₹ 1,800 = ₹ 5,700 2. Amount Received on Call: Total Call Due = 1,00,000 shares × ₹ 21 = ₹ 21,00,000 Less: Excess Application Money adjusted = (1,50,000 - 10,000 - 1,00,000) shares × ₹ 24 = 40,000 shares × ₹ 24 = ₹ 9,60,000 Less: Calls in Arrears = ₹ 5,700 Amount Received on Call = ₹ 21,00,000 - ₹ 9,60,000 - ₹ 5,700 = ₹ 11,34,300

Topics: Corporate Accounting

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