Page 86 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 3: Reissue of Forfeited Shares and Bonus Issue

3.7 Keywords Notes

Discount at Issues: The discount from par value at the time that a bond is issued.
Forfeiture of Shares: A share in a company that the owner loses (forfeits) by failing to meet the
purchase requirements.

Share Capital Account - Funds raised by issuing shares in return for cash or other considerations.

3.8 Review Questions

1. Explain in short reissue of shares?
2. What do you mean by Right Issue of Shares.
3. What is the meaning of forfeiture of shares? How are the shares forfeited? Can forfeited
shares be reissued at discount? If so, to what extent?

4. State the relevant provisions of the Companies Act regarding right issue in case of a public
company. How is the value of right computed?
5. What do you mean by forfeiture of shares? How are shares forfeited? Pass journal entries
regarding forfeiture and reissue of shares.
6. A Limited has a share capital of 10,00,000 divided into 10,000 equity shares of 100 each.
5,000 new shares of 100 each are issued to the existing shareholders at 140 per share in
such a way that the shareholder of every two old shares will get one share in this new
issue. The market value of one old share, on the commencement of the issue of right share,
becomes 200 cum-right. Find out the value of right included in market price.
7. X Co. Limited issued a prospectus for 20,000 shares of 10 each at a premium of 2 per
share payable as follows:
On application 2
On allotment 5 including premium
On first call 3
On second and final call 2
Applications were received for 30,000 shares and allotment made pro-rata to the applicants
of 24,000 shares and remaining were rejected. Money overpaid on application was
employed on account of sums due on allotment.

Mr. Y, to whom 400 shares were allotted, failed to pay allotment money and on his
subsequent failure to pay the first call, his shares were forfeited. Mr. Z, the holder of 600
shares failed to pay two calls and his shares were forfeited after the second call.

Of the shares forfeited, 800 shares were sold to Mr. A credited as fully paid for 11 per
share the whole of Mr. Y’s share being included.
Show the journal, cash book and balance sheet.

8. A company was registered with a nominal capital of 1,60,00,000 in equity shares of 100
each. 50,000 of these shares were issued to the public at a premium of 20 per share
payable as to 20 on application, 45 on allotment including premium, 25 on first call
and the balance on final call.

Applications were received for 65,000 shares and allotment was made on the basis of pro-
rata to the applicants of 60,000 shares. Money over paid on application was utilised on
account of sums due on allotment.

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