Reissue of Forfeited Shares At Premium And At Par, Originally Issued At Par Part 2

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In this case the total amount received on reissue of shares that has been credited to Share Forfeited A/c will be transferred to Capital Reserve A/c. Because no discount is given on reissue.

Example:

Y Ltd. forfeited 400 shares of Rs. 20 each, on which Rs 15 per share have been received and balance remains due but not paid. These shares were reissued

(a) at the rate of Rs 20 per share i.e. at par

(b) at the rate of Rs. 24 per share i.e. at premium

Make necessary journal entries for reissue of the shares

Solution:

Image of journal entries

Image of Journal Entries

Image of journal entries

Reissue of Forfeited Shares at Par, at Discount and at Premium, Originally Issued at Premium:

If the shares are issued at premium originally, they need not be reissued at premium. They can be issued at par or at premium or at discount.

  • If shares are reissued at par then the amount received will be credited to the Share Forfeited A/c and then transferred to Capital Reserve A/c

  • If shares are issued at discount the amount of discount allowed will be adjusted towards the amount credited to share forfeited A/c the balance amount of Share Forfeited A/c will be transferred to Capital Reserve A/c.

  • If shares are reissued at premium, the premium received will be credited to Securities Premium A/c.

Reissue of Forfeited Shares At Par, At Discount And At Premium

Reissue of Forfeited Shares at Par, at Discount and at Premium

Reissue of Forfeited Shares At Par, At Discount And At Premium

Example:

AZ Ltd. forfeited 200 shares of Rs 10 each originally issued at a premium of Rs 4 per share, the holder of which paid Rs 3 per share on application but did not pay the allotment money of Rs 7 per share (including premium) and call of Rs. 4 per share. Make necessary journal entries for the forfeiture and for reissue of these shares if:

I. Reissued at Rs 10 per share i.e. at par

II. Reissued at Rs 8 per share i.e. at discount

III. Reissued at Rs 12 per share i.e. at premium

Solution:

Image of journal entries solution

Image of Journal Entries Solution

Image of journal entries solution

In this case no amount to be adjusted towards discount so Rs.600 will be the capital gain to the firm and that will be transferred to Capital Reserve A/c.

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