Issue of Share – Case Study with MCQs

Issue of Share

Issue of Share – Case Study 1

Nidiya limited was incorporated on 1st April 2017 with a registered office in Mumbai. The capital clause of memorandum of Association reflected a registered capital of 8,00,000 equity shares of Rs.10 each and 1,00,000 preference shares of Rs.50 each.
Since some large investments were required for building and machinery the company in consultation with vendors, Ms. VPS Enterprises issued 1,00,000 equity shares and 20,000 preference shares at par to them in full consideration of assets acquired. Besides this, the company issued 2,00,000 equity shares for cash at par payable as Rs 3 on application, 2 on the allotment, 3 on the first call, and 2 on the second call.

Till date, second call has not yet been made and all the shareholders have paid except Mr. Ajay who did not pay allotment and calls on his 300 shares and Mr. Vipul who did not pay first call on his 200 shares. Shares of Mr. Ajay were then forfeited and out of them 100 shares were reissued at Rs.12 per share.

Based on the above information you are required to answer the following questions.

1. Shares issue to vendors of building and machinery, Ms. VPS Enterprises, would be classified as:
a. Preferential Allotment
b. Employee Stock Option Plan
c. Issue for Consideration other than cash
d. Right Issue of Shares

Answer

c. Issue for Consideration other than cash

2. How many equity shares of the company have been subscribed?
a. 3,00,000
b. 2,99,500
c. 2,99,800
d. None of these

Answer

c. 2,99,800

Explanation:
Total Share Issued (1,00,000 to Vendor and 2,00,000 to General Public) = 3,00,000

Amount not paid on Allotment (Mr. Ajay) 300 Shares – Forfeited and Out of them Reissued 100 Shares.

3,00,000 – 300 + 100 = 2,99,800

3. What is the amount of security premium reflected in the balance sheet at the end of the year?
a. ₹ 200
b. ₹ 600
c. ₹ 400
d. ₹ 1,000

Answer

c. ₹400

Explanation: Called-up amount = ₹ 8 per share

Re-issue amount = ₹ 12 per share

Premium = ₹ 4 per share (12 – 8)

Number of shares re-issued = 100

Security premium reflected in the balance sheet at the end of the year = 100 × 4 = 400

4. What amount of share forfeiture would be reflected in the balance sheet?
a. ₹ 600
b. ₹ 900
c. ₹ 200
d. ₹ 300

Answer

a. ₹ 600

Explanation: No. of Shares Forfeited at the end of the year: 200
Amount of share forfeiture to be reflected in the balance sheet: 200 × 3 = ₹ 600

Issue of Shares – Case Study 2

Read the following text.
Janta Ltd. had an authorized capital of 2,00,000 equity shares of ₹ 10 each. The company offered to the public for subscription 1,00,000 shares. Applications were received for 97,000 shares. The amount was payable as follows on application was ₹ 2 per share, ₹ 4 was payable each on allotment and first and final call. Shankar, a shareholder holding 600 shares failed to pay the allotment money. His shares were forfeited. The company did not make the first and final call.

Based on the above information you are required to answer the following questions.

1. Name the type of share capital which is shown in the Memorandum of Association of the company-

a. Issued capital
b. Subscribed Capital
c. Authorised Capital
d. Paid-up capital

Answer

c. Authorised Capital

2. The amount forfeited on forfeiture of Shankar’s shares is

a. ₹6,000
b. ₹1,200
c. ₹3,600
d. ₹2,400

Answer

b. ₹1,200

3. Janta Ltd is-

a. Private Company
b. Public Company
c. Government Company
d. Public Corporation

Answer

b. Public Company

4. When shares are forfeited, the Share Capital Account is debited with __________ and the Share Forfeiture Account is credited with ______________.

a. Paid up capital of shares forfeited; Called up capital of shares forfeited
b. Called up capital of shares forfeited; Calls in arrear of shares forfeited
c. Called up capital of shares forfeited; Amount received on shares forfeited
d. Calls in arrears of shares forfeited; Amount received on shares forfeited

Answer

c. Called up capital of shares forfeited; Amount received on shares forfeited

Issue of Share

Related Case Studies: Accountancy Case Studies

Spread the love

Be the first to comment

Leave a Reply

Your email address will not be published.


*