Question

Taleb Cars Ltd. issued 5,000 shares of $ 15 each at a premium of $ 5 per share, payable as:

On application $ 6 (including $ 2 premium) per share

On allotment $ 14 (including $ 3 premium) per share

Applications were received for 5,000 shares and allotment was made to all.

The journal entries of allotment are:

A.

Particulares	Dr	Cr	Particulares	Dr	Cr
Share Capital              A/c                                               Share Allotment         A/c             Securities Premium a/c            (Share allotment money with premium amount Due)	70,000	55,000 15,000	Bank A/c                     Share Allotment A/C Securities Premium a/c	70,000	55,000 15,000

B.

Particulares	Dr	Cr	Particulares	Dr	Cr
Bank             A/c                                              Share Allotment   A/c                   (Amount received for 5,000 shares)	70,000	70,000	Share Allotment A/c           Share Capital A/     Securities Premium A/c                  (Share allotment money transferred to share capital & securities Premium	70,000	55,000 15,000

C.

Particulares	Dr	Cr	Particulares	Dr	Cr
Share Allotment         A/c                                               Share Capital                A/c             Securities Premium a/c            (Share allotment money with premium amount Due)	70,000	55,000 15,000	Bank A/c                     Share Allotment A/C	70,000	70,000

D.

Particulares	Dr	Cr	Particulares	Dr	Cr
Bank              A/c                                              Share Capital                A/c             Securities Premium a/c            (Share allotment money with premium amount Due)	70,000	55,000 15,000	Share Capital A/          Securities Premium A/c         Share Allotment A/c (Share allotment money transferred to share capital & securities Premium	55,000 15,000	70,000

Answer 1

Number of shares issued = 5,000

Allotment money per share = $14

Securities Premium per share (on allotment) = $3

Bank will be debited by = Number of shares issued x Allotment money per share

= 5,000 x 14

= $70,000

Securities Premium will be credited by = Number of shares issued x Securities Premium per share

= 5,000 x 3

= $15,000

Share capital will be credited by = Number of shares issued x ( Allotment money per share - Securities Premium per share)

= 5,000 x (14 - 3)

= $55,000

Hence, correct option is (B)