Orange Limited issued a prospectus inviting applications for 2,50,000 equity shares of 10 each at a premium of 2 per share payable as under: On…

Journal Entries in the books of Orange Limited Particulars Dr. ₹ Cr. ₹ Bank A/c (Note 1 – Column - 3) 14,00,000 To Equity Share Application A/c 14,00,000 (Being application money received on 7,00,000 shares @2 per share) Equity Share Application A/c 14,00,000 To Equity Share Capital A/c 5,00,000 To Equity Share Allotment A/c (Note 1 - Column - 5) 5,20,000 To Bank A/c (Note 1 –Column - 6) 3,80,000 (Being application money on 2,50,000 shares transferred to Equity Share Capital Account; on 2,60,000 shares adjusted with allotment and on 1,90,000 shares refunded as per Board’s Resolution No…..dated…) Equity Share Allotment A/c 10,00,000 To Equity Share Capital A/c 5,00,000 To Securities Premium a/c 5,00,000 (Being allotment money due on 2,50,000 shares @4 each including premium at 2 each as per Board’s Resolution No….dated….) Bank A/c (Note 1 – Column - 8) 4,80,000 To Equity Share Allotment A/c 4,80,000 (Being balance allotment money received) Equity Share First and Final Call A/c 15,00,000 To Equity Share Capital A/c 15,00,000 (Being final call money due on 2,50,000 shares @6 per share as per Board’s Resolution No…..dated….) Bank Account A/c 14,94,000 Calls in arrear A/c (WN - 2) 6,000 To Equity Share First & Final Call A/c 15,00,000 (Being amounts due on first call received except on 1000 shares) Equity share capital A/c 10,000 To Share forfeiture A/c 4,000 To Calls in arrear A/c 6,000 (Being - 1,000 shares forfeited for non payment of final call) (WN - 2) Bank Account A/c (₹ 1,000 x 9) 9,000 Share forfeiture A/c (₹ 1,000 x 1) 1,000 To Equity Share Capital A /c (₹ 1,000 x 10) 10,000 (Being forfeited shares reissued at 1 discount) Share forfeiture A/c 3,000 To Capital reserve A/c 3,000 (Being share forfeiture transferred to capital reserve*) (WN - 3) Note: 1. Calculation for Adjustment and Refund Category No. of Shares Applied for No. of Shares Allotted Amount Received on Application Amount Required on Application Amount adjusted on Allotment Refund [₹ 3 – (₹ 4 +5)] Amount due on Allotment Amount received on Allotment (1) (2) (3) (4) (5) (6) (7) (8) 30,000 Nil 60,000 Nil Nil 60,000 Nil Nil (i) 70,000 70,000 1,40,000 1,40,000 Nil Nil 2,80,000 2,80,000 (ii) 2,00,000 1,00,000 4,00,000 2,00,000 2,00,000 Nil 4,00,000 2,00,000 (iii) 4,00,000 80,000 8,00,000 1,60,000 3,20,000 3,20,000 3,20,000 Nil TOTAL 7,00,000 2,50,000 14,00,000 5,00,000 5,20,000 3,80,000 10,00,000 4,80,000 Also, (i) Amount Received on Application (3) = No. of shares applied for (1) X 2 (ii) Amount Required on Application (4) = No. of shares allotted (2) X 2 2. Number of shares to be forfeited from Mr. Mohan: Applicant from category - C applied for5,000 shares In category - C against - 4,00,000 shares applied - 80,000 shares allotted. Therefore, No. of shares allotted to applicant who applied for5,000 shares = 5,000 x (₹ 80,000 /4,00,000) = 1,000 shares allotted. So, number of shares to be forfeited from Mr. Mohan = 1,000 shares 3. Calculation of Profit/Loss on re -issue of shares Particulars ₹ Amount received on re -issue (₹ 1,000 x 9) 9,000 Add: Amount already received before forfeiture (₹ 1,000 x 4) 4,000 Total 13,000 Less: Nominal value of such shares @10 per share 10,000 Profit on Re -issue transferred to capital Reserve 3,000