Forfeiture of Shares Practical Problems and Solutions

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Forfeiture of Shares at Par

Practical Problem No. 1

A company forfeits 100 shares of $10 each, fully called up on which a shareholder has failed to pay the First Call Money of $3 per share and the Second and Final Call Money of $3 per share.

Pass the journal entry.

Solution

forfeiture-of-shares-at-par-practical-problems-and-solutions

Forfeiture of Shares at Premium

Practical Problem No.2

A company forfeits 100 shares of $10 each issued at $11 per share. The premium was payable on allotment. The shareholder failed to pay the allotment money of $3 per share and second and final call of $5 per share.

Pass the journal entry.

Solution

forfeiture-of-share-atpremium-questions-and-answers

Forfeiture of Shares at Discount

Practical Problem No. 3

A company forfeits 100 shares of $10 each issued at $9 per share on account of non-payment of $4 per share by the shareholder.

Pass the journal entry.

Solution

Forfeiture-of-shares-at-discount-practical-probolems-and-solutions

Practical Problem No. 4

X Ltd. issued 20,000 Equity shares of $10 each at a discount of 10%. The amount payable as: $2 on application, $3 on allotment, $5 on final call. Mr. Seth, the holder of 1,000 shares did not pay the amount due on call and his shares were forfeited by the Company.

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Journalise the entries for forfeiture.

Solution

forfeiture-of-shares-practical-problems-and-solutions

Practical Problem No. 5

A Ltd. had its issued capital comprising 20,000 equity shares of $10 each payable as: $2 on application, $3 on allotment (including premium), $3 on 1st call and $3 on final call.

The shares were called up to the 1st call stage. All the share money received except from John, holding 300 shares, who paid only application and except from Harry, holding 100 shares, who paid upto allotment. All these shares were forfeited.

Solution

Question and Answers

Reissue of Forfeited Shares

Practical Problem No. 6

Mr. John is the holder of 200 shares of $10 each. He had paid on these shares application money of $2 each, allotment money of $2 each and first call money of $3 each. He failed to pay the final call amount of $3 per share. His shares were forfeited and reissued at $8 per share as fully paid up.

Give the necessary entries to record the forfeiture and reissue.

Solution

reissue-of-forefeited-shares journal entries

Reissue of a part of forfeited shares

Practical Problem 7

A holds 10 shares of $10 each on which he has paid $1 per share as application money.
B holds 20 shares of $10 each on which he has paid $1 on application, $2 on allotment and $2 on first call.
C holds 30 shares of $10 each and has paid $1 on application, $2 on allotment and $2 on first call.

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They all fail to pay their arrears and the second call of $2 per share. Therefore, the Directors forfeited their shares. The shares of C were then reissued at $7 per share as fully paid up.

Pass necessary journal entries of forfeiture and reissue of shares.

Solution

reissue-a-part-of-forfeited-shares-journ-entries

Journal

journal-entries-for-reissue-of-forfeited-shares

Share-allotment-entries

Alternatively, the first entry can also be passed in the following method.

Forefeiture-shares-reissued-journal-entries

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