By DeeCee – Divine Classes

SHARES & DEBENTURES

Q.1 A company issued 20,000 equity shares of Rs 10 each at par payable as under: On application Rs
3; on allotment Rs 2; on first call Rs 4 and on final call Rs 1 per share. (1)

Applications were received for 65,000 shares. Applications for 15,000 were rejected and pro-rata
allotment was made to the applicants for 50,000 shares. How much amount will be received in cash
on first call? Excess application money is adjusted towards amount due on allotment and calls.

(a) 80,000

(b) 50,000

(c) 30,000

(d) Nil

Or

A company forfeits 1,000 shares of Rs 10 each. It had received Rs 6,000 on these shares. What is the
maximum discount that can be allowed by the company on the reissue of 400 shares?

(a) Rs 4,000

(b) Rs 400

(c) Rs 1,600

(d) Rs 2,400

Q.2 Savitri Ltd. issued 50,000, 8% Debentures of Rs 100 each at certain rate of premium and to be
redeemed at 10% premium. At the time of writing off Loss on Issue of Debentures, Statement of
Profit and Loss was debited with Rs 2,00,000. At what rate of premium, these debentures were
issued? (1)

(a) 10%

(b) 16%

(c) 6%

(d) 4%

Or

Durga Ltd. issued 80,000, 10% Debentures of Rs 100 each at certain rate of discount and were to be
redeemed at 20% premium. Existing balance of Securities Premium before issuing of these
debentures was Rs 25,00,000 and after writing off Loss on Issue of Debentures, the balance in
Securities Premium was Rs 5,00,000.

At what rate of discount, these debentures were issued?

(a) 10%

(b) 5%

(c) 25%

1
By DeeCee – Divine Classes

(d) 15%

Q.3 A. Ltd. issued 10,000, 6% Debentures of Rs 100 each at a discount of 3% redeemable at the end
of 5 years at a premium of 5%. ‘Loss on Issue of Debentures Account’ will be: (1)

(a) Debited with Rs 30,000

(b) Debited with Rs 50,000

(c) Credited with Rs 50,000

(d) Debited with Rs 80,000

Q.4 Interest on debentures is paid on: (1)

(a) Issue Price

(b) Either on Issue Price or on Nominal Value

(c) Nominal Value

(d) None of the above

Q.5 X Ltd. forfeited 1,000 shares of Rs 10 each for non-payment of final call of Rs 3 each. After reissue
of 600 of these shares, Rs 3,000 were transferred to capital reserve. Shares were reissue for: (1)

(a) Rs 1,200

(b) Rs 4,800

(c) Rs 3,600

(d) Rs 4,000

Q.6 Venus Ltd. took over assets of Rs 10,00,000 and liabilities of Rs 1,80,000 of Cayns Ltd. for Rs
7,60,000. Venus Ltd. issued 9% Debentures of Rs 100 each at a discount of 5% in full satisfaction of
the purchase consideration in favour of Cayns Ltd.

Pass necessary journal entries in the books of Venus Ltd. for the above transactions, Venus Ltd.
writes off all capital losses in the first year itself. (3)

Or

Q.6 Neeraj Ltd. took over business of Ajay enterprises on 1-04-2020. The details of the agreement
regarding the assets and liabilities to be taken over are:

Particulars Book Value (Rs) Agreed Value (Rs)

Building 20,00,000 35,00,000
Plant and Machinery 12,00,000 8,00,000
Stock 4,00,000 4,00,000
Trade receivables 5,00,000 4,00,000
Creditors 2,00,000 3,00,000
Outstanding expenses 50,000 1,00,000
It was decided to pay for purchase consideration as Rs 7,00,000 through Cheque and balance by
issue of Rs 2,00,000, 9% Debentures of Rs 20 each at a premium of 25%. Journalise.

2
By DeeCee – Divine Classes

Q.7 X Ltd. invited applications for 20,000 shares of Rs 10 each payable as under: Rs 3 per share on
application; Rs 3 per share on Allotment; Rs 2 per share on First Call; and Rs 2 per share on Final Call.

Final Call was not made by the company. An applicant who had been allotted 100 shares failed to pay
Allotment and First Call money due from him. His shares were forfeited after the First Call and were
immediately re-issued at Rs 8.50 per share. (4)

Prepare the balance sheet of the company as per Schedule III Part I of the companies act 2013.

Q.8 XL Ltd. invited applications for issuing 1,00,000 equity shares of Rs 10 each at par The amount
was payable as follows: (6)

On Application Rs 3 per share.

On Allotment Rs 4 per share.

On First and Final Call Rs 3 per share.

The issue was over-subscribed by three times. Applications for 20% shares were rejected and the
money refunded. Allotment was made to the remaining applicants as follows.

Category No. of Shares Applied No. of Shares Allotted

I 1,60,000 80,000

II 80,000 20,000

Excess money received with applications was adjusted towards sums due on allotment and first and
final call. All calls were made and were duly received except the final call by a shareholder belonging
to Category I who has applied for 320 shares. His shares were forfeited. The forfeited shares were re-
issued at Rs 15 per share fully paid up.

Pass necessary Journal entries for the above transactions in the book of XL Ltd. Open calls in-arrears
and calls in advance account whenever required.

OR

Q.8 Bayson Ltd. invited applications for issuing 54,000 shares of Rs 100 each payable as follows:

Rs 50 per share on application

Rs 10 per share on allotment

Balance on first and final call.

Applications were received for 80,000 shares.

Full allotment was made to the applicants of 14,000 shares. The remaining applicants were allotted
40,000 shares on pro-rata basis. Excess money received with application was adjusted towards sums
due on allotment and call.

Vibhor, holding 1,200 shares, who belonged to the category of applicants to whom full allotment was
made, paid the call money at the time of allotment. Vidur, who belonged to the category of
applicants to whom shares were allotted on pro-rata basis did not pay anything after application on
his 400 shares. Vidur's shares were forfeited after the first and final call. All the forfeited shares were
later on re-issued at Rs 110 per share as fully paid up.

3
By DeeCee – Divine Classes

Pass the necessary journal entries in the books of Bayson Ltd. for the above transactions by opening
calls in arrears and calls in advance account wherever necessary.

Q.9 On 1st January, 2017, Star Ltd. issued 1,000; 12% Debentures of Rs 100 each at a discount of 5%,
repayable as follows:

On 31st December, 2019 Rs 20,000

On 31st December, 2020 Rs 60,000

On 31st December, 2021 Rs 20,000

The company pays interest on debentures annually.

You are required to:

(a) Pass the Journal entries (including interest) for the year beginning 1st January, 2017 to 31st
December, 2017.

(b) Prepare the 'Discount on Issue of Debentures Account', till it is finally closed. (6)

4
By DeeCee – Divine Classes

Answer Key

Ans.1 (c) 30,000

Or

Ans.1 (d) Rs 2,400

Ans.2 (c) 6%

Or

Ans.2 (b) 5%

Ans 3. (d) Debited with Rs 80,000

Ans.4 (c) Nominal Value

Ans.5 (b) Rs 4,800

Ans.6

Date L.F. Dr (Rs) Cr (Rs)

(i) Sundry assets a/c Dr 1,00,000
To Sundry liabilities A/c 1,80,000
To Cayns Ltd. 7,60,000
To Capital Reserve A/c (Balance fig.) 60,000
(Business purchased from Cayns Ltd.)
(ii) Cayns Ltd. Dr 7,60,000
Discount on issue of Debentures A/c Dr 40,000
To 9% Debentures A/c 8,00,000
(Rs 8,000, 9% Debentures of Rs 100 each used at 40,000
a discount of 5%) 40,000
(iii) Capital Reserve A/c Dr
To Discount on Issue of Debentures a/c

Working note: Number of Debentures Issued = 7,60,000/95 = 8,000

OR

Ans.6 Journal of Neeraj

Date Particulars L.f. Debit Credit

2020
April 1 Building A/c Dr 35,00,000
Plant & Machinery A/c Dr 8,00,000
Stock A/c Dr 4,00,000
Trade Receivable A/c Dr 4,00,000
Goodwill A/c (Balancing figure) Dr 10,00,000
To Creditors A/c 3,00,000
To Outstanding expenses A/c 1,00,000
To Ajay Enterprises A/c 57,00,000
(Assets and liabilities of Business taken
over, recorded at agreed value)
“ Ajay Enterprise A/c Dr 57,00,000
To Bank A/c 7,00,000

5
By DeeCee – Divine Classes

To 9% debentures A/c 40,00,000

To Securities Premium Reserve A/c 10,00,000
(Purchase consideration paid to Ajay
enterprise)

Ans 7. BALANCE SHEET OF X LTD.

As at ……………

Particulars Note Current year Previous year

No.
1. EQUITY AND LIABILITIES :
Shareholder’s Funds :
(a) Share Capital 1 1,60,000
(b) Reserve and Surplus 2 350
1,60,350
2. ASSETS :
Current Assets :
Cash and Cash Equivalents 3 1,60,350
Notes to Accounts

(1) Share Capital :

Issued Share Capital :
20,000 shares of Rs10 each 2,00,000
Subscribed but not fully Paid Capital
20,000 shares of Rs10 each, Rs8 per share called up 1,60,000

(2) Reserve and Surplus

Capital Reserve 300
Securities Premium Reserve A/c 50
350
(3) Cash and Cash Equivalents
Cash at bank 1,60,350

Ans.8 Journal of XL Ltd.

Date Particulars L.f. Debit Credit

2020
April 1 Bank A/c Dr 9,00,000
To Share Application A/c 9,00,000
(Application received for 3,00,000 shares
@3 each)
Share application A/c Dr 9,00,000
To Share Capital A/c 3,00,000
To Share Allotment A/c 3,20,000
To Calls in advance A/c 60,000
To Bank A/c 2,20,000
(Applications money adjusted ) (As per
note 1)
Share Allotment A/c Dr 4,00,000

6
By DeeCee – Divine Classes

To Share Capital A/c 4,00,000

(Allotment due on 1,00,000 shares @4
each)
Bank A/c (4,00,000 – 3,20,000) Dr 80,000
To Share Allotment A/c 80,000
(Allotment money received in full)
Share first and final call A/c Dr 3,00,000
To Share Capital A/c 3,00,000
(First and Final Call due on 1,00,000
shares @3 each)
Bank A/c Dr 2,39,520
Calls in advance A/c Dr 60,000
Calls in Arrears A/c Dr 480
To Share first and final call A/c 3,00,000
(Amount received on First and final call )
Share Capital A/c Dr 1,600
To Calls in Arrears A/c 480
To Forfeited Shares A/c 1,120
(Forfeiture of 160 Shares)
Bank A/c Dr 2,400
To Share Capital A/c 1,600
To Securities Premium A/c 800
(Reissue of 160 shares @15 each)
Forfeited Shares A/c Dr 1,120
To Capital Reserve A/c 1,120
(Transfer of Gain on reissue)

Dr CALLS IN ADVANCE Cr

Particulars J.F Rs Particulars J.f Rs

To Share First and Final 60,000 By Share Application A/c 60,000
Call A/c

Dr CALLS IN ARREARS Cr

Particulars J.F Rs Particulars J.f Rs

To Share First and Final 480 By Share Capital A/c 480
Call A/c

Working Note :

(1) In category (i) applicants for 1,60,000 shares are allotted 80,000 shares.
Excess Money Received on Application = 1,60,000 shares – 80,000 shares
= 80,000 shares x Rs3 = Rs2,40,000
Entire Excess of Rs2,40,000 will be adjusted on allotment.
In category (ii) Applicants of 80,000 shares are allotted 20,000 share.
Excess Money Received on Application:
80,000 shares – 20,000 shares = 60,000 x Rs3 = 1,80,000
Less : Adjusted allotment : 20,000 shares x Rs4 = 80,000

7
By DeeCee – Divine Classes

1,00,000
Less : Transferred to Calls in Advance A/c: 20,000
Shares x Rs3 = 60,000
Amount Returned 40,000
Total Amount received :
Return on 20% application : 60,000 x Rs3 1,80,000
Return on Catrgory II Application 40,000
2,20,000
Total Excess application money adjusted on allotment =
Category (i) 2,40,000
Category (ii) 80,000
3,20,000

(2) Number of share Applied By Defaulting shareholder = 320

Hence, Share Allotted to Him = 320 x 80,000/1,60,000 = 160
Amount not received from defaulting shareholder
On First call = 160 shares x Rs3 = 480
Total Amount due on first call : 1,00,000 x Rs3 = 3,00,000
Less: Amount Adjusted for Calls in advance = 60,000
2,40,000

Less: Amount not received from defaulting shareholder = 480

Net Amount Received on First call in Cash = 2,39,520

Or

Ans.8 BAYSON Ltd.

Date Particulars L.f. Debit Credit

Bank A/c Dr 40,00,000

To Equity Share Application A/c 40,00,000
(Application money received)
Equity Share Application A/c Dr 40,00,000
To Equity Share Capital A/c 27,00,000
To Equity Share Allotment A/c 4,00,000
To Calls in Advance A/c (Note 1) 9,00,000
(Application money Transferred)
Equity Share Allotment A/c Dr 5,40,000
To Equity Share Capital A/c 5,40,000
(Share Allotment made due on 54,000
Shares @10 )
Bank A/c Dr 1,88,000
To Equity Share Allotment A/c (Note 2) 1,40,000
To Calls In Advance A/c (1,200 Share 48,000
xRs40)
(Allotment money received alongside
Calls in advance on 1,200 Shares)
Equity Share First and final Call A/c Dr 21,60,000

8
By DeeCee – Divine Classes

To Equity Share Capital A/c 21,60,000

(First and Final Call due on 54,000 shares
@40 Rs)
Bank A/c (Note 1) Dr 12,05,000
Calls in Advance A/c (9,00,000 + 48,000)
Dr 9,48,000
Calls In arrears A/c Dr 7,000
To Equity Share First and Final Call A/c 21,60,000
(First and Final Call money Received)

Equity Share Capital A/c Dr 40,000

To Calls in Arrears A/c 7,000
To Forfeited Shares A/c 33,000
(400 Shares of Vidur Forfeited)
Bank A/c Dr 44,000
To Equity Share Capital A/c 40,000
To Securities Premium Reserve A/c 4,000
(400 Shares reissued @110 Per Share
Fully paid up)
Forfeited Shares A/c Dr 33,000
To Capital Reserve A/c 33,000
(Gain on Reissued shares transferred to
Capital reserve)
Working Note

(1) Application were Received for 80,000 shares and Applicants for 14,000 shares were made full
allotment. Hence, Applicants for 66,000 Shares were allotted = 44,000 Shares.
Excess application money received = (66,000 – 40,000) x Rs50 = 13,00,000
Less: Adjusted on Allotment : 40,000 Shares x Rs10 = 4,00,000
Amount Transferred to Calls in Advance A/c 9,00,000

(2) Total Allotment money due 5,40,000

Less: Already received at the time of Application 4,00,000

Net Amount on Allotment 1,40,000

(3) (a) Shares Applied by Vidur = 66,000/40,000 x 400 Shares = 660 Shares

Excess application Money received from him = 660 – 400

= 260 Shares x Rs50 = 13,000

Less: Adjusted on Allotment = 400 Shares x Rs10 = 4,000

Calls in Advance for Vidur 9,000

(b) Amount due from Vidur on First and Final Call = 400 x Rs40 = 16,000

Less: Calls in Advance From Vidur = 9,000

Amount not Paid by Vidur on first and Final Call = 7,000

(c) Total Amount due on First and Final Call : 54,000 Shares x Rs40 21,60,00

9
By DeeCee – Divine Classes

Less: Amount Transferred to Calls in Advance (9,00,000 + 48,000) 9,48,000

12,12,000

Less: Not Received from Vidur on First And Final Call 7,000

12,05,000

Ans.9 (a) Journal

Date Particulars L.f. Debit Credit

2017
Jan 1 Bank A/c Dr 95,000
To Debentures Application & Allotment 95,000
A/c
(Debentures Application money received)
Debentures Application & Allotment A/c 95,000
Dr
Discount on Issue of Debentures A/c Dr 5,000
To 12% Debentures A/c 1,00,000
(Issue of 1,000, 12% debentures of Rs100
each at a discount of 5%)
Dec. 31 Debentures Interest A/c Dr 12,000
To Debentureholders A/c 12,000
(Interest due on Debentures)
Debentureholders A/c Dr 12,000
To Bank A/c 12,000
(Payment of Interest)
Statement of Profit & Loss Dr 17,000
To Debentures Interest A/c 12,000
To Discount on Issue of Debentures A/c 5,000
(Debentures interest transferred to
statement of profit and loss and discount
on issue of debentures written off)

(b)

Dr DISCOUNT ON ISSUE OF DEBENTURES ACCOUNT Cr

Date Particulars Rs Date Particulars Rs

Jan. 1 To 12% Debentures 5,000 Dec. By Statement of Profit & 5,000
31 Loss
5,000 5,000

10