Company Accounts

Share Capital

Easy

Eicher Ltd. issued 50,000 shares of Rs.10 each at a premium of Rs.5 per share payable as follows:

On application Rs.3 per share

On allotment Rs.5 (including Rs.3 Premium)

On First Call Rs.5 (including Rs.2 Premium)

On Final Call Balance amount

Application were received for 72,000 shares. Directors allotted 50,000 shares to the applicants applying for 65,000 shares, the remaining applications being refused. Money overpaid on application was utilised towards sum due on allotment. All the money was duly received with the exception of first call from Rahul, who applied for 2,600 shares. Due to non payment of 1st call his share were forfeited immediately. Later on these share were re-issued at minimum issue price.

On the basis of following case study, answer the question.

Identify the ratio in which shares are issued on Pro-rata basis.

50:72

72:50

13:10

10:13

✅ Correct Option: 3

The shares were allotted in the ratio 13 : 10, meaning for every 13 shares applied, 10 shares were allotted.

Out of 72,000 applications, 7,000 were refused, so the pro-rata applicants applied for 65,000 shares and received 50,000. That gives 65,000 : 50,000, which simplifies to 13 : 10. Expressed the other way, as allotted to applied, it is 10 : 13.

For example, Rahul applied for 2,600 shares, so he was allotted 2,600 × 10/13 = 2,000 shares.

Question 46

Record journal entry for forfeiture of Rahul's shares.

Question 47

Identify the amount by which bank account would be debited/credited on refund of rejected applications

Question 48

Determine the amount to be transferred to Capital Reserve on reissue of Rahul's Shares

Question 50

Before forfeiture of Rahul's shares, who are required to issue notice in this regard.

Identify the ratio in which shares are issued on Pro-rata basis.

Solution

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