The Delhi Cloth Mills Ltd. invited applications for 10,000 Shares of R

1.	The Delhi Cloth Mills Ltd. invited applications for 10,000 Shares of Rs 100 each at a premium of Rs 10 each payable as below: Rs 50 on Application; Rs 35 on Allotment (including premium), and Rs 25 on Call. Applications for 15,000 shares were received. Applications for 2,500 shares did not get any allotment and their money returned. Allotment was made pro-data to the remaining applicants. Mr. A was allotted 400 shares. He failed to pay the amount due on allotment and call money.The company forfeited his shares and subsequently re-issued at Rs 105 per share. (a) Show the journal entries in the books of company. (b) Which value has been affected by rejecting applications for 2,500 shares? Suggest some better alternative.
Answer» The Delhi Cloth Mills Ltd. invited applications for 10,000 Shares of Rs 100 each at a premium of Rs 10 each payable as below: Rs 50 on Application; Rs 35 on Allotment (including premium), and Rs 25 on Call. Applications for 15,000 shares were received. Applications for 2,500 shares did not get any allotment and their money returned. Allotment was made pro-data to the remaining applicants. Mr. A was allotted 400 shares. He failed to pay the amount due on allotment and call money.The company forfeited his shares and subsequently re-issued at Rs 105 per share. (a) Show the journal entries in the books of company. (b) Which value has been affected by rejecting applications for 2,500 shares? Suggest some better alternative.

The Delhi Cloth Mills Ltd. invited applications for 10,000 Shares of Rs 100 each at a premium of Rs 10 each payable as below: Rs 50 on Application; Rs 35 on Allotment (including premium), and Rs 25 on Call. Applications for 15,000 shares were received. Applications for 2,500 shares did not get any allotment and their money returned. Allotment was made pro-data to the remaining applicants. Mr. A was allotted 400 shares. He failed to pay the amount due on allotment and call money.The company forfeited his shares and subsequently re-issued at Rs 105 per share. (a) Show the journal entries in the books of company. (b) Which value has been affected by rejecting applications for 2,500 shares? Suggest some better alternative.

Answer»

The Delhi Cloth Mills Ltd. invited applications for 10,000 Shares of Rs 100 each at a premium of Rs 10 each payable as below:

Rs 50 on Application;

Rs 35 on Allotment (including premium), and

Rs 25 on Call.

Applications for 15,000 shares were received. Applications for 2,500 shares did not get any allotment and their money returned. Allotment was made pro-data to the remaining applicants.

Mr. A was allotted 400 shares. He failed to pay the amount due on allotment and call money.The company forfeited his shares and subsequently re-issued at Rs 105 per share.

(a) Show the journal entries in the books of company.

(b) Which value has been affected by rejecting applications for 2,500 shares? Suggest some better alternative.

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