REMEDIAL MATERIAL FOR SLOW LEARNER

Q 1Ruby ltd.issued 30000 equity share of Rs 10 each at a premium of Rs 3 per share
     Payable as Rs. 3 on app. Rs. 6 on allotment including premium’s. 2on first call
    And Rs, 2 on second call. Application received 40000 share.4000 application rejected and          
    balance were subscribed on pro-rata basis.Mr A holder of 600 share, failed to pay allotment and
   subsequent failure to pay first call, his share were forfeited..Mr B holder of 400 share failed to
   pay two calls. His share were forfeited. Later on. 800 share(including A all share), were re –
   issued To Mr.C, as fully paid at Rs 11 per share. Pass necessary entries. 
                                   
ANS     Capital reserves 3360, Amount not received on allotment 3240,      


2. Babba Company purchased a machine from Gabba ltd for Rs.400000 at 10% trade
   Discount. Half amount paid by bank and the remaining amount by share of RS.10 each
   At 10% discount. Record above transaction.                                                          
ANS     a) Dr. Machine a/c & Cr.Baba by 360000
   b) Dr.Baba a/c & Cr.Bank 180000
   c) Dr.Baba a/c and discount on share a/c by 18000, 20000
        And Cr.equity share capital by 200000                                            
3. Pass necessary entries
     I Convert 100, 12% deb.of Rs.100 each into 10% Preference share of Rs.100 each at 25%
       Premium.
     II Redeemed Rs.100000, 12% deb. At a premium of 10% by draw a lots.
           
ANS a) Dr.12% Deb a/c by 10000 and Cr.10% Pref share & share   premium  By 8000 and 2000
      b) Dr.12% Deb and Premium on red. Of deb by 100000 and 10000 &  Cr.Bank by 110000                                                  
.4   Poonam company Ltd. Issued 10000 equity share at Rs.100 each on 10% Premium.
     Amount called as Rs.20 on application, RS.40 on allotment (including premium), and
     Balance on call,
     Application was received for 20500 shares. Director rejects 500 shares and allots other
     Application on pro-rata basis. All money received except call on 50 shares which was later on forfeited .After due notice forfeited share re-issued at Rs 90.Pass necessary entries.                6    
ANS  Amount Recd on application 410000
        Amount Recd on allotment 200000
        Amount Recd on call 497500
        Amount in capital reserve 2000                                     

5.         A. Ltd. Invited application from public for issue of 2,00,000 equity shares of Rs.10 each, payable on application Rs. 3, on allotment Rs.5 and Rs. 2 on first & final call. Company received applications for 3, 00,000 shares and decided to allot the share on pro-rata basis. Excess of application amounts to be utilized towards allotment and calls. B, who was allotted 2,000 shares failed to pay allotment and his shares were forfeited after Working :
ANS   a. Excess application amount
        (3,00,000 -2,00,000)x 3=3,00,000
        b. Calls in arrear:
      on allotment 7,000 & 1st call 4,000
     Forfeiture amount 3,000x3=9,000
6   Ankit Ltd. Company purchased a machine worth Rs. 1,05,000 from M/s India
Traders. Payment was made by issue of equity share of Rs. 10 fully paid at
issue price of Rs. 10.50 each. Pass journal entries in the books’ of the company. 
           
       ANS      No. of shares to be issued = 1,05,000/10.50=10,000
                        Share  premium 10,000 x .50 =5,000
                           a. Machinery a/c           - Dr.  1,05,000
                                      To M/s India Trader a/c                    1,05,000
                            b. M/s India trader a/c     -Dr.  1,05,000
                                      To Sh. Cap. a/c                                 1,00,000
                         To Sh. Prem. a/c                                    5,000
7         M/s M. Ltd. Purchased Machinery for Rs. 3,30,000 from M/s N.Ltd. Payment was
made by issue of 9% debenture of Rs. 100. Pass journal entries for purchase of
machinery and issue of debenture when-
a.                Debentures are issued at par
b.               Debentures are issued at premium of 10%
c.                                                                           
ANS         No. of debenture when issued at par 3,300
                  No. of debenture when issued at premium 3,000
                           Machinery a/c                  -Dr.3,30,000
                                              To M/s N. Ltd.                                  3,30,000
                            N. Ltd.                           –Dr. 3,30,000
                                                To 9% Debenture a/c                         3,30,000
                            b. N. Ltd.                           –Dr. 3,30,000
                                                To 9% Debenture a/c                         3,00,000
                                  To Debenture premium a/c                   30,000
  1. Pass journal entries for issue of debentures in the books of M/s
Gupta Ltd.:-
a.                Issued 10,000, 12% debentures of Rs. 100 each at discount of 6%
repayable at premium of 6%.
b.               Issued 15,000 10% debentures of Rs. 100 at premium of 20%
Repayable at par.                                                                                     

   . Pass journal entries in the books of the company.


ANS     a. Bank a/c                  -  Dr 9,40,000
                 Loss on issue of deb. –Dr 1,20,000
                 To  12% Deb. a/c                       10,00,000
                 To Prem. on red. of deb. a/c            60,000
               b.    Bank a/c                  -  Dr 18,00,000
                        To  12% Deb. a/c                       15,00,000

     .9      Lakshmi Ltd., issued a prospectus inviting applications for 30,000        
             shares of Rs.10 each payable as under.

                      On application   Rs.3
                      On allotment      Rs.2
                      On first call        Rs.2
                      On  final call      Rs.3
        Applications were received for 40,000 shares, and pro-rata allotment     
       was made on application for 34,000 shares.  Excess money paid on
        application was utilized towards allotment money.  Mr. Rao whom 500
        shares were allotted failed to pay the allotment money and on his
        subsequent failure to pay the first call money, his shares were  forfeited 
           
ANS   1. Bank A/c                       -Dr.            1,20,000
       To Share Application A/c                             1,20,000
2. Share application A/c   -Dr.              90,000
       To Sh. Cap. A/c                                                   90,000
. 3.  Share Application a/c                       18,000
       To Bank a/c                                                       18,000
 4. Sh. Allot. A/c                 -Dr.            60,000
      To Sh.Cap. A/c                                                 60,000
5. Bank A/C                      - Dr.           47,000
    S.Appl.a/c                      Dr              12,000
    Calls in arrear A/c        - Dr.              1,000
          To  Sh. Allot A/c                                         60,000
6. Sh. 1st Call A/c               -Dr.           60,000
        To Sh. Cap. A/C                                            60,000
7. Bank A/C                      - Dr.              59,000
  Calls in arrear A/C        - Dr .               1,000
     To Sh 1st call A/C                                            60,000
8. Sh. Cap. A/c                   -Dr.               3,500
      To Sh. Forfeiture A/c                                         1,701
      To S. Allot.  A/c                                                   799
       To S. first call a/c                                              1,000
9. Sh. Final  Call A/c     -Dr.              88,500
        To Sh. Cap. A/                                               88,500
           10. Bank A/C                      - Dr.            88,500
           To Sh 1st call A/C                                           88,500
10.    Swapna Ltd., issued 2,00,000 equity shares of Rs.10 each at a discount     
      of 10%.  On these shares, payments are to be made as follows.
      Rs.3 on application, Rs.2 on allotment and Rs.5 on first and final call.
      Balu who is allotted 6,000 shares has not paid the first and final call. 
      Hence his shares have been forfeited and shave been reissued at a              
      discount of 5%.  Pass necessary journal entries for forfeiture and re-issue only                     
      in company books                                                                                     

ANS
1. S. Cap. a/c  Dr. 60,000 (6000X10)
      To Share forfeited a/                           24,000
       To Discount of issue of shares a/c       6,000
        To S. First and final call A/c             30,000
2.  Bank a/c Dr.         57,000  
    Disc.on issue of shares a/c  3,000
       To S.Cap. a/c                                      60,000
3. Share forfeited a/c Dr      27,000
        To Capital Reserve a/c                        27,000
.
11      DIFFERENCE BETWEEN SHARE & DEBENTURE



       DEBENTURE                                                 SHARE

 A debenture holder is creditor of co.         A shareholder is joint owner of       
                                                                                      co.


     A debenture holder gets interest.         .         A shareholder gets dividend.


A debenture holder gets interest               A shareholder gets  profit when co.  
       the co. gets profit or loss                           gets  profit. Only.


The rate of interest is fixed for all             The rate of dividend change every                          
    the time                                                    year       


 Debenture holder had no voting                Shareholder have voting right.
     Right

Debenture may   be converted into           Share are never convertible.
 Share.


All debentures are secured in India.           Shareholders do not have any                    
                                                                         Security


On winding up the debenture             On winding up the shareholder paid                      
Paid before shareholder                                    after Debenture

12       A  ltd X ltd convert 200  12% debenture of rs. 100 each issued at 10% discount into convert 1000 12% debentureof Rs. 100 each issued at 5% discount into equity shareof Rs. 10 each  at par before maturity period.

          ANS               (1)    BANK A/C DR. 95000
                                DISCOUNT  A/C DR. 5000
                                             TO 12% DEBENTURE  100000

                      (2)  12% DEBENTURE A/C DR.    95000
                                            TO EQUITY SHARE.          95000
    
                     (BEING 9500 SHARE ISSUED TO  DEBENTURE HODER)
13      Ltd. forfeited 300 shares of Rs. 10 each fully called up held by Ramesh for non-payment of allotment money of Rs. 3 per share and final call money of Rs. 4 per share.  Out of these 250 shares were reissued to Rishi for a total payment of Rs.2, 000.  Pass necessary journal entries.




Journal
Date
Particular
L.F.
Debit
Rs.
Credit
Rs.

Shares capital A/c (300 x Rs. 10)
         To share forfeited A/c (300 x  3)
         To share allotment A/c (300 x 3)
         To share final call A/c (300 x 4)
( Being forfeiture of 300 share for nonpayment of allotment and final call money)

3,000

    900
    900
 1,200

Bank A/c
Share forfeited A/c
          To share capital A/c
(  being re issue of 250 forfeited shares for Rs 8 per share fully paid)             

2,000
   500


2,500

Share forfeited A/c
          To capital reserve A/c
(Being profit on re issue of 250 shares transferred to capital reserve)

250

250



 Note: 
        Total amount forfeited on 300 shares @ Rs. 3 per share  =    Rs. 900
     Amount forfeited on 250 shares re issued @ Rs 3 per share = Rs 750
  Less: Discount allowed on reissue of forfeited shares        =       500  Profit on reissue of forfeited shares transfer to capital reserve =  250



14.  How will you show share capital in the balance sheet?
  Ans: 
SCHEDULE VI PART I
                               FORM OF BALANCE SHEET
(Disclosure of Share capital only)

Liabilities
Amount
(1)                    Share Capital
          Authorized Capital


***
            Issued Capital
***
              Subscribed Capital           ***
   Less:  Calls Unpaid                     ***
   Add:   Forfeited Shares               ***                 


***
(2)                    Reserves and Surplus

 A.  Capital Reserve
 B.  capital redemption reserve
 C.  Securities Premium
 D.  Other reserve
 Less:    Debit balance in P&L A/C(if any)
 E.  Surplus
 F.  Sinking fund



Example:
               A company was formed with an authorized capital of Rs.20,00,000 divided into 20,000 shares of Rs.100 each. It issued to the public 15,000 shares, payable as Rs.30 on application, Rs.30 on allotment and the balance on first and final call. Applications were received for Rs.12,000 shares. The amount of allotment was duly received except from Mahesh, who held 1,000 shares did not pay allotment. The company did not make call.

How will you show share capital in the Balance Sheet?

Solution: 
                       

                            BALANCE SHEET OF A COMPANY
                                          (As On…………..)


Liabilities
Amount
Assets
Amount
Share Capital
Authorized :
20,000 shares of Rs.100 each
Issued :
15,000 shares  of Rs.100 each
Subscribed:
12,000 shares of Rs.100, each Rs. 60 per shares
call up             7,20,000
Less:                   30,000


20,00,000
Current Assets
 Cash at Bank

6,90,000

15,00,000
 





6,90,000
Total
6,90,000
Total
6,90,000


15.  Bharath Tyres Ltd. Invited application for 1,00,000 shares of Rs. 10 each issued at a premium of Rs. 4 per share.  The amount was payable as under :
     On Application         Rs. 6 ( including premium Rs. 2)
      On Allotment           Rs. 6 ( including premium Rs. 2)
      Balance on first and final call.
      Application for 1,50,000 shares were received.  Allotment was made to all applicants on pro-rata basis.
      Subodh, to whom 200 shares were allotted, failed to pay allotment money.  Vikram, to whom 100 shares were allotted, failed to pay the call money.  Their shares were forfeited and afterwards reissued @ Rs. 8 per share fully paid up.
    Pass necessary Journal entries.

Solution  :
Journal
Date
Particulars
L.F.
Debit
Credit
      I
Bank A/c
    Share Application  A/c
(Being application received for 1,50,000 shares of Rs. 6 including premium Rs. 6)

9,00,000

9,00,000
II
Share Application A/c
     To Share Capital A/c
      To Securities Premium A/c
      To Share Allotment A/c
(Being adjustment of share application money)

9,00,000


4,00,000
2,00,000
3,00,000
III
Share Allotment A/c
      To Share Capital A/c
       To Securities Premium A/c
(Being allotment money due on 1,00,000 shares)

6,00,000
4,00,000
2,00,000
IV
Bank A/c
      To Share Allotment A/c
(Being allotment money received on 99,800)

2,99,400

2,99,400
V
Share First and Final call A/c
     To Share Capital A/c
(Being the first and final call money due on 1,00,000 shares)

2,00,000

2,00,000
VI
Bank A/c
     To Share First and Final call A/c
(Being first and final call money received on 99,700 share of Rs. 2 per share)

1,99,400

1,99,400
VII
Share Capital A/c
Securities Premium A/c
       To Share Forfeiture A/c
       To Share Allotment A/c
       To Share First and Final Call A/c
(Being 200 share forfeited for non-payment of allotment and first call)

2,000
400


1,400
600
400
VIII
Share Capital A/c
    To Share Forfeited A/c
    To Share First and Final Call A/c
(Being 100 share forfeited for the non-payment of call money)

1,000

800
200
IX
Bank A/c
Share Forfeited A/c
    To Share Capital A/c
(Being the re-issue of 300 shares @ Rs. 8 per share, fully paid)

2,400
600


3,000
X
Forfeited Share A/c
    To Capita Reserve A/c
(Being the transfer of profit on re-issue of shares to capital reserve A/c)

1,600
1,600



16.  K ltd has been registered with an authorized capital of           Rs. 2,00,000 divided into 2,000 shares of Rs. 100 each of which 1,000 shares were offered for public subscription at a premium of Rs. 5 per share payable as under :
                                                                Rs.
On Application                                          10
 On Allotment                                            25 ( including premium)
On First Call                                              40
On Final Call                                          30

     Application were received for 1,800 shares of which applications for 300 shares were rejected outright, the rest of the applications were allotted 1,000 shares on pro-rata basis.  Excess application money was transferred to allotment.

     All the money were duly received except from Sunder, holder of 100 shares, who failed to pay allotment and first call money.  His shares were later on forfeited, and reissued to Shyam at Rs. 60 per share, Rs. 70 paid up final call has not been made.
Pass necessary journal entries in the books of K ltd.

Solution  :
Journal
Date
                  Particulars
L.F.
Debit
Credit
    I
Bank A/c
   To Share Application A/c
(Being application money on 1,800 shares @ Rs. 10 each received)

18,000

18,000
II
Share Application A/c
    To Share Capital A/c
    To Bank A/c
     To Share Allotment A/c
(Being share application  money transferred to share capital A/c on 1,000 shares @ 10 each on the pro-rata basis)

18,000

10,000
3,000
5,000
III
Share Allotment A/c
   To Share Capital A/c
   To Securities Premium A/c
(Being share allotment made due with premium)

25,000

20,000
  5,000

IV
Bank A/c
   To Share Allotment A/c
(Being share allotment money received with exception of Rs. 2,000)

18,000

18,000
V
Share First Call A/c
   To Share Capital A/c
(Being share first call money made due)

40,000

40,000
VI
Bank A/c
Calls-in-Arrears A/c
   To Share First Call A/c
(Being share first call money received)

36,000
4,000


40,000
VII
Share Capital A/c (70 × 100)
Securities Premium A/c (5 × 100)
   To Share Forfeited A/c
   To Share Call-in-Arrears
(Being 100 share forfeited for the non-payment of allotment and share first call)

7,000
500


1,500
6,000
VIII
Bank A/c
Share Forfeited A/c
   To Share Capital A/c
(Being reissue of forfeited shares @ Rs. 60 per share, Rs. 70 Paid up)

6,000
1,000


7,000
IX
Share Forfeited A/c
   To Capital Reserve A/c
(Being transfer of share forfeited A/c to capital reserve A/c)

500

500

                                                           
Working  Note  :

(i)  Calculation of amount received on allotment :
     Total amount due on allotment (1,000 × 25)                 25,000
      Less:  Allotment money received in advance               (5,000)
    Less:  Amount of allotment not received from Sunder (2,000)
 Amount received on allotment                                            18,000
 
(ii)  Shares Applied by Sunder = 1,500/1,000  × 100 = 150
(iii) Money paid by Sunder on application  (150  × 10)          1,500
       Money utilized as application money (100 × 10)              1,000
        Surplus money transferred to allotment                             500

(iv) Allotment money due from Sunder (100 × 25)                 2,500
      Less : Allotment money received in advance from
                 Sunder                                                                          500
      Amount of allotment not received form Sunder               2,000

(iv)  While forfeiting shares, Share Capital Account will be debited @ Rs. 70 per share because the final call has been made.
17   .X Ltd. Issued 2,00,000 10% debentures of Rs 100 each at par to be redeemed at par after  12 years.  Debentures are callable after four years at an exercise price of Rs 104.  After six years company invoked the call option and holders of 10.000 debentures responded to the call option.  Record necessary entries at the time of issue of debentures and at the time of cancellation of  debentures.

Journal
Date
Particular
l.f

Debit
Rs
Credit
Rs

On issue of debentures
Bank A/c
       To 10% Debentures application A/c
(money received on application)

2,00,00,000



2,00,00,000




   10,00,000
        40,000



       40,000

2,00,00,000



2,00,00,000





   10,40,000



        40,000
10% Debenture application A/c
       To 10% debenture A/c
( debenture application money transferred to 10% debentures account on allotment)
At the time of cancellation of debentures
10% debentures A/c
Loss on redemption  A/c
       To Bank A/c
(debenture redeemed under transferred call option at Rs. 104)
Profit & Loss A/c
       To Loss on Redemption A/c
(Loss on redemption of debentures transferred to profit and Loss A/c)

18   X Ltd., issued 2, 00,000 10% Debentures of Rs.100 each at par to be redeemed at par after12 years. Debentures are callable after four years at an exercise price of Rs.104. After six years company invoked the call option and holders of 10,000debentures responded to the call option. Record necessary entries at the time of issue of debentures and at the time of cancellation of debentures.

Solution:
Date
Particular
l.f

Debit
Rs
Credit
Rs

On issue of debentures
Bank A/c
       To 10% Debentures application A/c
(money received on application)

2,00,00,000



2,00,00,000




   10,00,000
        40,000



       40,000

2,00,00,000



2,00,00,000





   10,40,000



        40,000
10% Debenture application A/c
       To 10% debenture A/c
( debenture application money transferred to 10% debentures account on allotment)
At the time of cancellation of debentures
10% debentures A/c
Loss on redemption  A/c
       To Bank A/c
(debenture redeemed under transferred call option at Rs. 104)
Profit & Loss A/c
       To Loss on Redemption A/c
(Loss on redemption of debentures transferred to profit and Loss A/c)

19 . Pass journal entries in the books of a limited company in  connection      with the issue and redemption  of debentures with reference to the following transactions:
1.     10% Debentures of Rs 5, 00,000 issued at par and redeemable at par.
2.     10% Debentures of Rs 5, 00,000 issued at a premium of 5% but redeemable at par.
3.     10% Debentures of Rs 5, 00,000 issued at a discount of 5 per cent but redeemable at par.
4.     10% Debentures of Rs 5, 00,000 issued at par but redeemable at a premium of 5 percent.
5.     10% Debentures of Rs 5, 00,000 issued a discount of 5% and redeemable at 5 per cent premium.








Date
Particular
l.f

Debit
Rs
Credit
Rs
1.
(a) On issue
(i) Bank A/c
          To 10% Debentures Application & allotment A/c
(Amount received on issue)


5,00,000





5,00,000

(ii)10% Debentures Application & allotment A/c
          To 10% debentures A/c
(Allotment of debentures)

5,00,000


5,00,000

(b) On redemption
(i) 10% Debentures A/c
          To debentures holders A/c
(amount due to debenture holders on redemption)


5,00,000


5,00,000


(ii) Debentures A/c
             To bank A/c
(Final payment made to debenture holders)

5,00,000

5,00,000

2.
(a) On issue
(i) Bank A/c
           To 10% Debentures Application A/c
(amount received on issue)


5,25,000


5,25,000

(ii)10 % Debenture Application & allotment A/c
           To 10% debenture A/c
           To Debe3nture holders A/c
(allotment on debentures and premium in issue brought into account)  

5,25,000


5,00,000
  25,000

(b) On redemption
(i) 10% Debentures A/c
            To debentures holders A/c
(amount due to debenture holders on redemption)


5,00,000


5,00,000

(ii) Debenture holders A/c
            To Bank A/c
(final payment made to debentures holders)

5,25,000

5,25,000
3.
(a) On issue
(i) Bank A/c
          To 10% debentures Application & allotment A/c
(Amount received on issue)



4,75,000



4,75,000

(ii) 10% Debentures application & Allotment A/c
Discount on issue of debentures A/c
         To 10% Debenture A/c
(allotment of debentures and discount  on issue brought into  account )






4,75,000

   25,000




5,00,000

(b) On redemption
(i) 10% Debentures A/c
            To debenture holders A/c
(amount due to debentures holders on redemption )


5,00,000


5,00,000

(ii) debenture holders A/c
             To bank A/c
(final payment made to debenture holders)

5,00,000

5,00,000

4.
(a) On issue
(i) Bank A/c
           To 10% debentures Application & allotment A/c
(Amount received on issue)


5,00,000


5,00,000



(ii) 10% debentures Application & allotment A/c
      Loss on issue of debentures                A/c
             To 10% debentures A/c
             To premium of redemption of debentures A/c
(allotment of debentures and premium on redemption brought into account)


5,00,000

   25,000




5,00,000

   25,000

(b)On redemption
     (i) 10% debentures A/c
          premium on redemption of debenture A/c
                  To debenture holders  A/c
(amount due to debenture holders on redemption including premium )


5,00,000

   25,000
5,25,000


(ii) Debenture holders A/c
               To bank A/c
(final payment made to debentures)

5,25,000

5,25,000
5.
(a) On issue
(i) Bank A/c
           To 10%bentures application & allotment A/c
(amount received in issue)


4,75,000



4,75,000



            
(ii) 10% debentures Application & allotment A/c
      Loss on issue of debentures A/c
             To 10 debenture A/c
             To premium or redemption of debenture A/c
(allotment of debentures and discount on issue and premium on redemption brought into account  as loss on issue)


4,75,000

   50,000




5,00,000
   25,000

(b) On redemption
(i) 10% debentures A/c
    Premium on redemption of debenture A/c
             To debenture holders A/c
(amount due to debenture  holders on redemption including premium)



5,00,000

  25,000




5,25,000



(ii) Debentureholders A/c
               To bank A/c
(final payment made to debenture holders)

5,25,000

5,25,000





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