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problem: Max Limited issued to the public 10,000 shares of Rs.10/- each at a premium of Rs.2/-per share payable as Rs.2/- on application, Rs.4/- on allotment (comprising premium) and Rs.3/- on each of the two other calls. Applications were received for 15,000 shares. All applications were put under four classes and allotment was made as shown:

Category A – to applicants of 5,000 shares – in full
Category B - to applicants of 6,000 shares – 4,000 shares
Category C - to applicants of 3,000 shares – 1,000 shares
Category D - to applicants of 1,000 shares – Nil.

Apart from in the cases where applications were totally rejected, surplus application money was not to be refunded however to be adjusted against moneys due on allotment and calls.

Abhra, an applicant under the Category B to whom 400 shares were allotted, failed to pay the allotment money and the first call money. His shares were forfeited. Bipra, an applicant under the Category C to whom 300 shares were allotted, didn’t make any additional payment and his shares were forfeited after the second call. 500 of the forfeited shares were issued to the Chandra as completely paid for Rs.8/- per share (comprising all shares of Abhra).

Describe the journal entries in the books of Max Limited.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M912635

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