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Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.?
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Mr. P who was the holder of 2,500 preference shares of 100 each, on wh...
Journal Entries for Forfeiture and Re-issue of Shares
1. Forfeiture of Shares
When Mr. P could not pay his dues on allotment and first call, the directors forfeited his shares.
The journal entry for forfeiture of shares will be:
Forfeiture A/c Dr. 1,75,000
Share Capital (Preference) A/c Cr. 1,75,000
Explanation:
- Forfeiture A/c is a nominal account and hence debited as per the rule of nominal account.
- Share Capital (Preference) A/c is a capital account and hence credited as per the rule of capital account.
- The amount of ₹ 1,75,000 is calculated as follows:
- Number of shares forfeited = 2,500
- Amount called-up per share = ₹ 70
- Amount paid on each share = ₹ 20 + ₹ 20 = ₹ 40
- Amount due on each share = ₹ 70 - ₹ 40 = ₹ 30
- Total amount due on 2,500 shares = ₹ 30 x 2,500 = ₹ 75,000
- Forfeiture amount (usually 1/2 of the amount due) = ₹ 75,000 x 1/2 = ₹ 37,500
- Total forfeiture amount = ₹ 37,500 x 2 = ₹ 75,000
- The forfeiture amount is credited to Share Capital (Preference) A/c.
2. Re-issue of Forfeited Shares
The directors reissued 2,000 of the forfeited shares to Mr. Q at ₹ 60 per share paid-up as 70 per share.
The journal entry for re-issue of shares will be:
Bank A/c Dr. 1,20,000
Share Capital (Preference) A/c Cr. 1,40,000
Forfeited Shares A/c Cr. 20,000
Explanation:
- Bank A/c is a real account and hence debited as per the rule of real account.
- Share Capital (Preference) A/c is a capital account and hence credited as per the rule of capital account.
- Forfeited Shares A/c is a nominal account and hence credited as per the rule of nominal account.
- The amount of ₹ 1,20,000 is calculated as follows:
- Number of shares reissued = 2,000
- Re-issue price per share = ₹ 60
- Paid-up value per share = ₹ 70
- Amount received from Mr. Q = ₹ 60 x 2,000 = ₹ 1,20,000
- The amount of ₹ 1,40,000 is the face value of 2,000 shares reissued (i.e., 2,000 x ₹ 70).
- The amount of ₹ 20,000 is the excess of face value over re-issue price (i.e., ₹ 70 - ₹ 60 = ₹ 10 per share x 2,000 shares). This amount is credited to Forfeited Shares A/c.
1. Forfeiture of Shares
When Mr. P could not pay his dues on allotment and first call, the directors forfeited his shares.
The journal entry for forfeiture of shares will be:
Forfeiture A/c Dr. 1,75,000
Share Capital (Preference) A/c Cr. 1,75,000
Explanation:
- Forfeiture A/c is a nominal account and hence debited as per the rule of nominal account.
- Share Capital (Preference) A/c is a capital account and hence credited as per the rule of capital account.
- The amount of ₹ 1,75,000 is calculated as follows:
- Number of shares forfeited = 2,500
- Amount called-up per share = ₹ 70
- Amount paid on each share = ₹ 20 + ₹ 20 = ₹ 40
- Amount due on each share = ₹ 70 - ₹ 40 = ₹ 30
- Total amount due on 2,500 shares = ₹ 30 x 2,500 = ₹ 75,000
- Forfeiture amount (usually 1/2 of the amount due) = ₹ 75,000 x 1/2 = ₹ 37,500
- Total forfeiture amount = ₹ 37,500 x 2 = ₹ 75,000
- The forfeiture amount is credited to Share Capital (Preference) A/c.
2. Re-issue of Forfeited Shares
The directors reissued 2,000 of the forfeited shares to Mr. Q at ₹ 60 per share paid-up as 70 per share.
The journal entry for re-issue of shares will be:
Bank A/c Dr. 1,20,000
Share Capital (Preference) A/c Cr. 1,40,000
Forfeited Shares A/c Cr. 20,000
Explanation:
- Bank A/c is a real account and hence debited as per the rule of real account.
- Share Capital (Preference) A/c is a capital account and hence credited as per the rule of capital account.
- Forfeited Shares A/c is a nominal account and hence credited as per the rule of nominal account.
- The amount of ₹ 1,20,000 is calculated as follows:
- Number of shares reissued = 2,000
- Re-issue price per share = ₹ 60
- Paid-up value per share = ₹ 70
- Amount received from Mr. Q = ₹ 60 x 2,000 = ₹ 1,20,000
- The amount of ₹ 1,40,000 is the face value of 2,000 shares reissued (i.e., 2,000 x ₹ 70).
- The amount of ₹ 20,000 is the excess of face value over re-issue price (i.e., ₹ 70 - ₹ 60 = ₹ 10 per share x 2,000 shares). This amount is credited to Forfeited Shares A/c.
Community Answer
Mr. P who was the holder of 2,500 preference shares of 100 each, on wh...
Mr. P who was the holder of 2,500 preference shares of Rs.100 each, on which Rs.70 per share has been called up could
not pay his dues on Allotment and First call each at Rs.20 per share. The Directors forfeited the above shares and
reissued 2,000 of such shares to Mr. Q at Rs.60 per share paid-up as Rs. 70 per share. You are required to prepare the
Journal Entries to record the above for feiture and re-issue in the books of the company.
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Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.?
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Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.?.
Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Mr. P who was the holder of 2,500 preference shares of 100 each, on which ₹ 70 per share has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share. The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60 per share paid-up as 70 per share. You are required to prepare the Journal Entries to record the above forfeiture and re-issue in the books of the company.?.
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