Question

Question 28

Al-walan Ltd. issued 20,000 shares of $ 50 each at a premium of $ 5 per share, payable as:

On application $ 10 per share

On allotment $ 25 (including $ 5 premium) per share

On first call $ 10 per share

On final call $ 10 per share

Applications were received for 25,000 shares and allotment was made to 20,000.  Applications for 5000 shares were rejected all together and application money was returned. Sultan, to whom 1,000 shares were allotted, failed to pay the final calls.

The journal entries of the firs call are

	A.	Particulares Dr Cr Particulares Dr Cr Bank             A/c                                   First call   A/c                   250,000 250,000 First call   A/c                       Share Capital A/          250,000 250,000
	B.	Particulares Dr Cr Particulares Dr Cr First call   A/c                       Share Capital A/     2000,000 2000,000 Bank             A/c                                   First call   A/c       200,000 200,000
	C.	Particulares Dr Cr Particulares Dr Cr First call   A/c             Share Capital A/     250,000 250,000 Bank             A/c                                   First call   A/c       250,000 250,000
	D.	Particulares Dr Cr Particulares Dr Cr Bank             A/c                                  First call   A/c                   200,000 200,000 First call   A/c                       Share Capital A/          200,000 200,000

Answer 1

According to the subscription, shares applied were 25,000, therefore amount received on application will be recorded as:

Bank A/c	250,000
Share Application A/c		250,000
(Being application money received)
Share Application A/c	250,000
Share Capital A/c		200,000
Bank A/c		50,000
(Application money transferred to capital A/c and excess money received)

According to the question, shares will be allotted to only 20,000 shareholders on premium of $5 each. It will be recorded as:

Share Allotment A/c	500,000
Share Capital A/c		400,000
Securities premium reserve A/c		100,000
(Allotment made due on premium)
Bank A/c	500,000
Share Allotment A/c		500,000
(Allotment money received)

First call will also be made on 20,000 shares. First it will be made due and then, amount will be received.

First Call A/c	200,000
Share Capital A/c		200,000
(First call made due on 20,000 shareholders for $10 each)
Bank A/c	200,000
First Call A/c		200,000
(Amount received on first call)

Therefore, the correct option will be B.