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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


Team Careers360 2nd Jan, 2024
Answer (1)
Team Careers360 16th Jan, 2024

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.

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