Question

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 calls.

The journal entries of allotment are.

A.

Particulares	Dr	Cr	Particulares	Dr	Cr
Bank             A/c                                              Share Allotment   A/c	625,000	625,000	Share Allotment A/c           Share Capital A/     Securities Premium A/c	625,000	500,000 125,000

B.

Particulares	Dr	Cr	Particulares	Dr	Cr
Share Allotment         A/c                                               Share Capital                A/c             Securities Premium a/c	625,000	500,000 125,000	Bank A/c                     Share Allotment A/C	625,000	625,000

C.

Particulares	Dr	Cr	Particulares	Dr	Cr
Share Capital              A/c                                               Share Allotment         A/c             Securities Premium a/c	500,000	400,000 100,000	Bank A/c                     Share Allotment A/C	500,000	500000

D.

Particulares	Dr	Cr	Particulares	Dr	Cr
Bank              A/c                                              Share Capital                A/c             Securities Premium a/c	625,000	500,000 125,000	Share Capital A/          Securities Premium A/c         Share Allotment A/c	500,000 125,000	625,000

chose A/b/c/d

Answer 1

Information given in the question-:

Applications money received 25,000 @ $10 = $250,000

Journal Entry to be passed-:

Bank A/c Dr. $250,000

To Share application money A/c $250,000

(Being share application money received)

Share application money received A/c Dr. $250,000

To Share Capital A/c $200,000 (20,000 X $10)

To Bank A/c $50,000 (5,000 X $10)

(Being share capital allotted and excess application money received refunded)

On allotment

Bank A/c Dr. $500,000

To Share Allotment A/c $500,000

(Being allotment money received)

Share Allotment A/c $ 500,000

To Share Capital A/c $400,000

To Securities Premium A/c $100,000

(Being shares allotted)

On the basis of above option (c) is the correct answer.