Bittu Ltd. issued 10,000 shares of Rs.10 each to public. Applications were received for 12,000 shares by paying Rs.2 per share. Shares were allotted on pro-rata basis to the public and excess money was kept to be used in allotment and further calls. Kittu failed to pay the allotment money of Rs.3 per share and her 1,000 shares were forfeited after due notice. No further calls were made to her. Her call in arrears was
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Solution
When issue is over-subscribed, the company will have to allot to each applicant according to the number of share applied by him. The excess application money is adjusted towards the sum due on allotment. Pro rata actually means ‘in proportion’.
So the proportion in which the shares will be allted = total shares allotted/total shares applications received = 10,000/12,000 = 5/6
Total shares held by Kittu = 1,000
Thus total shares applied by Kittu = 1,000 × 6/5 = 1,200
So excess application money received from Kittu = (1,200 – 1,000) × 2 = Rs. 400
Total allotment money due from Kittu = 1,000 × 3 = Rs. 3,000
Allotment money adjusted with excess application money = Rs. 400
So her calls in arrear was = 3,000 – 400 = Rs. 2,600
3,000 shares of Rs. 10 each of Krishna were forfeited by crediting Rs. 5,000 to share forfeiture account. Out of these, 1,800 shares were re-issued to Radhe for Rs. 9 per share. The amount to be transferred to capital reserve account will be
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Solution
When the shares forfeited are reissued at discount, Bank account is debited by the amount received and Share capital account is credited by the paid up amount. The amount of discount allowed is debited to Share Forfeited Account. This is for adjusting the amount of discount so allowed from the amount forfeited at the time of forfeiture.
Now the amount of discount allowed on reissue of shares at the most can be equal to the forfeited amount on such shares. In that case the share forfeited account after reissue will show a zero balance. But in case, this amount of discount is less than the amount forfeited, the remaining forfeited amount will be profit for the company. This profit is a capital gain to the company and is transferred to Capital Reserve account.
In the above question discount per share = 10 – 9 = Rs 1
Total discount on the 1800 reissued shares = Rs. 1,800
Proportionate Amount available in shares forfeiture account for 1800 shares reissued = Rs. 5,000 ×
1,800/3,000 = Rs. 3,000
The surplus amount to be transferred to capital reserve account = 3,000 – 1,800 = Rs. 1,200
Followings are the information related to Great Ltd.:
(i) Equity share capital called up Rs. 3,00,000,
(ii) Call-in advance Rs. 10,000,
(iii) Call in arrears Rs. 15,000 and
(iv) Proposed dividend 20%. The amount of dividend payable by Great Ltd. will be:
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Solution
If any amount has been called by the company either as allotment or call money and a shareholder has not paid that money, this is known as calls in arrears.
If any call has been made but while paying that call, some shareholders paid the amount of the rest of calls also, then such amount will be called as calls in advance.
Calls in advance and calls an arrears are not entitled for any dividend declared by the company.
Thus the dividend payable by the company will be 20% of called up capital-calls in arrear which is Rs. 3,00,000 – Rs. 15,000.
Dividend payable = 20% of 2,85,000 = Rs. 57,000.
On 1st June 2009, Harsh Ltd. issued 4,000 9% convertible debentures of Rs. 100 each at a premium of 10%. Interest is payable on September 30 and March 31, every year. Assuming
that the interest runs from the date of issue, the amount of interest expenditure debited to profit and loss account for the year ended 31st March 2010 will be :
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Solution
When the company has the debentures in Financial statements with entitlement to interest. Interest will accrue on a timely basis e.g. Month to month or period to period.
However the so accrued will become accrued and due on the said due dates.
If the company has to prepare the financial statements, it has to provide for the interest expense up to that period and show it under interest accrued but not due.
Interest from 1-6-2010 to 30-9-2009 i.e. for 4 months from the date of issue of debentures = 9% of
4,00,000 × 4/12 = 12,000
Interest from 1-10-2009 to 31-3-2010 = 9% of 4,00,000 × 6/12 = 18,000
Total interest to be debited to profit and loss for the year ended 31-3-2010 will be = 12,000 + 18,000 = Rs.30,000
Preference shares amounting to Rs. 1,00,000 are redeemed at a premium of 5% by issue of shares amounting to Rs. 50,000 at a premium of 10%. The amount to be transferred to
capital redemption reserve account will be:
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Solution
Capital Redemption Revere is created when a company buys it owns shares which reduce its share capital.
Suppose, the fresh equity shares or preference shares are issued to redeem the old preference shares, in this case the difference between the face value of preference shares and fresh shares issued will be transferred to capital redemption reserve account.
Here the face value of preference shares redeemed = Rs. 1,00,000
And the face value of fresh shares issued = Rs. 50,000
Thus amount to be transferred to capital redemption reserve = 1,00,000 – 50,000 = Rs. 50,000
A company issued 1,00,000 equity shares of Rs.10 each at a premium of Rs. 2 and 5,000 10% Debentures of Rs. 100 each at 10% discount. All the shares and debentures were
subscribed and allotted by crediting 10% Debentures account with :
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Solution
Aditya Ltd. issued 50,000 equity shares of Rs. 10 each for subscription. 40,000 shares were subscribed by the public by paying Rs. 3 as application money. Number of shares allotted to public by Aditya Ltd. will be:
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Solution
The demand for the shares is less than the number of shares issued by the company. Allotment of equity shares will be on the basis of shares subscribed by the public and not on the shares issued to the public for subscription.
Thus number of shares to be issued to the public will be 40,000 shares.
It is decided to form a partnership with a total capital of Rs. 6,00,000. Three partners Ajay,Vijay and Sanjay who will share profits and losses in the ratio of 5:3:2, agreed to contribute proportionate capital. Their capital contribution will be:
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Solution
Capital contribution is an amount of money or assets given to a business or partnership by the owners or partners. The capital contribution increases the owner or partner’s equity interest in the entity. here the partners will contribute capital in their agreed profit sharing ratio i.e. 5 : 3 : 2
Ajay’s contribution = 6,00,000 × 5/10 = Rs. 3,00,000
Vijay’s contribution = 6,00,000 × 3/10 = Rs. 1,80,000
Sanjay’s contribution = 6,00,000 × 2/10 = Rs. 1,20,000
M/s Mittal & Sen & Co. sends goods costing Rs. 50,000 to M/s Suneja & Jadeja & Co. for sale at invoice price. The invoice price of the goods was Rs. 60,000. Former spends Rs. 2,000 on freight for sending the delivery and later spends Rs. 1,500 for receiving the delivery. M/s Suneja & Jadeja & Co. sold 90% of goods at invoice price and earned a commission of Rs. 5,400. In the due course he made some credit sales also out of which some amount were proved to be bad and was borne by him only. Remaining goods were taken back by M/s Mittal & Sen & Co. The balance due was paid by M/s Suneja & Jadeja & Co. through a demand draft. The above transactions are in the nature of :
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Solution
The given transactions are in nature of consignment.
Under this method, the annual charge for depreciation decreases from year to year, so that the burden and benefits of later years are shared by the earlier years. Also, under
this method, the value of asset can never be completely extinguished. The other advantage of this method is that the total charge to revenue is uniform when the depreciation is
high, repairs are negligible; and as the repairs increase, the burden of depreciation gets lesser and lesser. This method of depreciation is:
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Solution
WDV method has been adopted in the given case.