Question : XYZ Ltd. invited applications for issuing 1,00,000 equity shares of Rs. 10 each at par. The amount was payable as follows:
On Application— Rs. 3 per share;
On Allotment— Rs. 4 per share; and
On First and Final Call— Rs. 3 per share.
The issue was oversubscribed by three times. Applications for 20% shares were rejected and the money refunded. Allotment was made to the remaining applicants as follows:
| Category | No. of Shares Applied | No. of Shares Allotted |
| I | 1,60,000 | 80,000 |
| II | 80,000 | 20,000 |
Excess money received with applications was adjusted towards sums due on allotment and first and final call. All calls were made and were duly received except the final call by a shareholder belonging to Category I who has applied for 320 shares. His shares were forfeited. The forfeited shares were reissued at Rs. 15 per share fully paid-up.
Question:- At the time of forfeiture of shares, share forfeited account will be:
Option 1: Rs. 1,000
Option 2: Rs. 1,120
Option 3: Rs. 1,500
Option 4: Rs. 1,400
Correct Answer: Rs. 1,120
Solution : Answer = Rs. 1,120
|
1. Adjustment of Application Money: |
Rs. |
|
Application money received on shares applied (3,00,000 x Rs. 3) |
9,00,000 |
|
Less: 20% applications rejected (20% of 3,00,000, i.e., 60,000 x Rs. 3)—Refunded (A) |
1,80,000 |
|
7,20,000 |
|
|
Less: Application money adjusted on allotted shares (1,00,000 x Rs. 3) |
3,00,000 |
|
(Category I and II) |
Excess Application money (Category I and II)
4,20,000
|
2. Adjustment of Excess Application Money: |
Rs. |
|
Category 1: Application money received (1,60,000 x Rs. 3) |
4,80,000 |
|
Less: Application money adjusted on allotted shares (80,000 x Rs. 3) (C) |
2,40,000 |
|
Excess application money |
2,40,000 |
|
Less: Excess application money to be adjusted on allotment |
2,40,000 |
|
Surplus |
Nil |
|
Category II: Application money received on shares applied (80,000 x Rs. 3) Less: Application money due on shares allotted (20,000 x Rs. 3) |
. 2,40,000 60,000 |
|
|
Excess Application money Less: Amount to be adjusted on Allotment (20,000 x Rs. 4) (D) |
80,000 |
1,80,000 |
|
Amount to be adjusted on first and final call (20,000 x Rs. 3) (E) |
60,000 |
1,40,000 |
|
Excess Amount to be refunded (B) |
40,000 |
• Total Application Money Refunded (A + B) = Rs. 1,80,000 + Rs. 40,000 = Rs. 2,20,000.
• Excess Application Money to be adjusted on Allotment (C + D) = Rs. 2,40,000 + Rs. 80,000 = Rs. 3,20,000.
• Excess Application Money to be adjusted on First and Final Call (Calls-in-Advance) = Rs. 60,000 (E).
3. Shares are reissued at premium, discount on reissue is Nil.Therefore, total amount of Rs. 1,120 credited to Forfeited Shares Account is capital gain and is transferred to Capital Reserve Account.
Hence, the correct option is 2.
