A company has issued for the public subscription 40,000 equity shares of TSh100 each at
premium of TSh20 per Share payable as under:
On application TSh 20 per share
On allotment TSh 50 per share including premium
On first call TSh 20 per share
On second call TSh 20 per share
Applications were received for 60,000 shares. Allotment was made prorate to the applicants
for 48,000 shares the remaining applications being refused and refunded in full. Money over
paid on application was utilised towards sum due on allotment.
Hussein, to whom 1,600 shares were allotted, failed to pay allotment money and first and
second calls money and Hassan to whom 2000 shares were allotted failed to pay the two
calls. These shares were sold to Samson as fully paid up at TSh80 per share.
Required:
Show the journal entries required to record the above transactions
1. Journal entry to record receipt of applications:
Dr. Share Application Account 800,000 (40,000 shares x TSh20 per share)
Cr. Share Capital Account 800,000
2. Journal entry to record allotment:
Dr. Share Allotment Account 1,200,000 (48,000 shares x TSh25 per share [TSh50- TSh20])
Cr. Share Application Account 800,000
Cr. Share Capital Account 400,000
Cr. Share Premium Account 400,000
3. Journal entry to record refund of excess application money:
Dr. Share Application Account 200,000 (10,000 shares x TSh20 per share)
Cr. Bank Account 200,000
4. Journal entry to record receipt of first call money:
Dr. Share First Call Account 200,000 (10,000 shares x TSh20 per share)
Cr. Bank Account 200,000
5. Journal entry to record receipt of second call money:
Dr. Share Second Call Account 200,000 (10,000 shares x TSh20 per share)
Cr. Bank Account 200,000
6. Journal entry to record forfeiture of Hussein's shares:
Dr. Share Forfeiture Account 128,000 (1,600 shares x TSh80 per share)
Cr. Share Capital Account 128,000
Cr. Share Premium Account 32,000 (1,600 shares x TSh20 per share)
7. Journal entry to record forfeiture of Hassan's shares:
Dr. Share Forfeiture Account 160,000 (2,000 shares x TSh80 per share)
Cr. Share Capital Account 160,000
Cr. Share Premium Account 40,000 (2,000 shares x TSh20 per share)
8. Journal entry to record sale of forfeited shares to Samson:
Dr. Bank Account 288,000 (3,600 shares x TSh80 per share)
Cr. Share Capital Account 288,000
Note: The Share Capital and Share Premium accounts will be adjusted according to the number of forfeited and sold shares.