The following is the Balance Sheet as at 31st March, 2013 of JINX Prospects Ltd. This will be satisfied by the issue of 50,000 preference shares of Rs 10 each, fully paid. The accounting entries depends on whether the shares were issued at Premium or Par. Account Disable 12. The Balance Sheet of M/s. 7,00,000, Therefore, contribution per equity share =Rs. In this case, the entry on forfeiture of shares will be as follows: Narration of the entry will be the same as stated in the earlier case. A scheme of re-organisation was prepared and passed. (a) where it is done as a short cut to forfeiture to avoid the formalities for a valid forfeiture and Solution : Journal Entry Date Particulars L.F. Dr. Cr. Capital Reduction A/c Dr. (Being the transfer of Capital Reduction A/c balance to Capital Reserve), 8,964 Equity shares of `100 each fully paid up, (a) Fixed Assets (after reduction of `1,50,000 due to, reconstruction) 8,30,000, Trade Receivables 2,14,500. Less than 20-25% of the number of shares outstanding prior to the distribution, Less than 25% of the number of shares outstanding prior to the distribution, Less than 25% of shares of the same class outstanding, Greater than 20-25% of the number of shares outstanding prior to the distribution, Equal to or greater than 100% of the number of shares outstanding prior to the distribution, Distributions of new shares that are less than 20-25% of those previously outstanding or that recur frequently are to be treated as stock dividends even if management representations to shareholders that it is a stock split, Distributions greater than 25% but less than 100% of the number of shares outstanding prior to the distribution are treated as a stock dividend when the distributions assume the character of stock dividends through repetition of issuance under circumstances not consistent with the true intent and purpose of a stock split, Distributions of over 25% may be accounted for as a stock dividend if they are part of a program of recurring distributions and accounting for them as a stock split would be misleading. Later, these shares were reissued as fully paid up to Suresh @ Rs 12 per share. Equity Share Capital (`4) A/c Dr. (Being consolidation of 25,000 10% equity shares of `4 each into, To Equity Share Capital (New `10) each (See note), By 10% Cumulative Preference Share Capital (`10) A/c, To Freehold Property 1,30,000, Less : Debenture holders 84000, 8,000 10% Cumulative Preference Shares of `10 each, 10,500 Equity Shares of `10 each (of the above 10,500 equity shares, 500 equity shares were issued for consideration other than cash), Trade Payables 11,000, Creditors for Expenses 30,000, Leasehold Property 1,00,000, Scheme dated. Payment was to be made as follows. The Balance Sheet of A & Co. (After Reconstruction) Applications totalled 4,00,000 shares; Shares were allotted on a pro rata basis. In the case of stock dividends declared by closely held reporting entities. Later, all these shares are reissued as fully paid up @ Rs 9 per share. The half-yearly working resulted in an increase of Sundry Debtors by Rs.60,000, Stock by Rs.80,000 and cash byRs.40,000. Consequently, the second call was made on 4,99,200 shares only which was duly received in full. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. The notice also must state that in the event of non-payment on or before the date so named, the shares in respect of which the notice has been served will be liable to be forfeited. A reporting entity may issue a dividend to its shareholders and give the shareholders the choice of receiving the dividend in either cash or shares (referred to as an optional dividend). Journal entry for forfeiture of shares is: If, we maintain Calls-in-Arrears Account we will credit Calls-in-Arrears Account instead of "Shares Allotment Amount" and "Shares Call Account". Capital Reduction A/c Dr. (Being arrears of Preference Share Dividend `48,000 are to be satisfied by issue of ` 12,000 equity shares to the extent of 25% of `48,00). Are you still working? In the Books of JINX Prospects Ltd. All moneys were duly received except the money on call on 100 shares which were forfeited after the requisite notices had been served. Raman Ltd. as at 31st December, 2006 as follows: The fixed assets are heavily overvalued. A mere refusal to take up newly issued shares, to which a shareholder is entitled to, is not a surrender of shares. Assume that Company A repurchases 10,000 shares of its stock at $10 per share (total consideration is $100,000). Additional cash required for working capital of ` 30,000 If a company wants to reissue the retired shares, a shareholder vote must be conducted. The SEC staff has historically taken the view that in this circumstance, the reporting entity should capitalize only the stocks par value from additional paid-in capital. Accounting for the distribution of nonmonetary assets to owners of an entity in a spinoff or other form of reorganization or liquidation or in a plan that is in substance the rescission of a prior business combination shall be based on the recorded amount (after reduction, if appropriate, for an indicated impairment of value) (see paragraph 360-10-40-4) of the nonmonetary assets distributed A pro rata distribution to owners of an entity of shares of a subsidiary or other investee entity that has been or is being consolidated or that has been or is being accounted for under the equity method is to be considered to be equivalent to a spinoff. Content Filtration 6. If the amounts not received on the two calls have been transferred to Calls in Arrear Account, Equity Share First Call Account and Equity Share Second Call Account will stand closed and will be represented by Calls in Arrear Account. 1. Any remaining amount is further charged to paid-in capital (until the balance reaches zero) and retained earnings. Investments are to reflect their market value. Uploader Agreement. The tax basis of the stock is increased by the amount of the consent dividend, Distribution to shareholders without a formal dividend declaration by the board of directors, Preferred dividend that must be declared and paid for all periods, before any dividend may be declared and paid to common shareholders, A transaction that does not necessarily have the characteristics generally associated with a dividend, but nevertheless results in a transfer of value to the holder of an equity instrument that requires accounting similar to a dividend (e.g.,accretion to redemption value on redeemable convertible preferred stock), Cumulative preferred dividends for prior periods not declared or paid, Amounts paid to holders of unissued shares (e.g., unvested stock or options) in a stock compensation plan, Dividend paid by distributing property (including notes) of the reporting entity rather than cash, Term indicating that the quoted price of a share of stock excludes the value of a declared dividend; the term attaches from the record date, or a few days before the record date (to allow for the recording of transfers just prior to the record date), until the payment date, Dividend in addition to the usual periodic dividend, Distribution to shareholders in excess of earnings, representing a return of capital, Dividend declared from current year earnings despite an accumulated deficit from past operations, Preferred dividend to which the preferred shareholders lose their rights if the dividend is not declared in respect of the applicable period, Preferred dividend that never exceeds a specified rate regardless of the dividends paid to common shareholders, A dividend for which shareholders may choose to receive cash or shares, Pro rata distribution to shareholders of cash, other assets (including evidences of indebtedness), or shares of capital stock declared by the board of directors, Dividend paid in the form of additional shares of stock having a value equal to the specified dividend rate, Preferred dividend in excess of a stipulated minimum rate, shared with the common shareholders (the preferred shareholders participate in the earnings of the entity) usually after the dividends paid to the common shareholders reach a prescribed amount per share. (a) A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the Board thinks fit. 6% Preference Share Capital A/c Dr. Equity Share Capital A/c Dr. (Being equity shares of `10 reduced to ` 2 as per reconstruction scheme). Allotment money on 200 shares is not received. Then, the Board of Directors reissued three-fourths of the forfeited shares as fully paid up @ Rs 9 per share. Total: 8,964. Disclaimer 8. 1, 90,000 from Yogesh Ltd. The following will be the entry on forfeiture of these shares if Calls in Arrear Account has not been opened:, To Equity Share Second Call Account 1,000. (b) At any time before a sale or disposal as aforesaid, the Board may cancel the forfeiture on such terms as it thinks fit. In the US, state law typically governs corporate activities, including the payment of dividends. List of Excel Shortcuts As on 31st March, 2013, Balance Sheet of SII Ltd. Investments sold out for Rs.1,50,000. One shareholder holding 800 shares did not pay the first call. Preference shareholders (including arrear preference dividend) 70% of `6,48,000 4,53,000 The sale of the stock is recorded by increasing (debiting) cash and increasing (crediting) common stock by $5,000. (2) Bank Balance Rs. (source - cashstock) Journal Entries: Solved Example For You: Arhan Ltd. Co. issues 100000 equity shares of face value of 100 on 1 st June 2018 at 20% premium. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Accrued Debenture Interest to be paid in cash. If a shareholder fails to pay allotment money or a call or a part thereof by the last date fixed for payment, the Board of Directors, if Articles of Association of the company empower it to do so, proceed to forfeit the shares on which allotment money or call has become in arrear. A stock dividend is a dividend paid in shares, generally issued to provide common shareholders with a portion of their respective interest in retained earnings without distributing cash from the business. (d) Current liabilities would be reduced by Rs.50,000 on account of provision no longer required. Illustration 1: Prem Ltd. purchased assets of Rs. Bad debts to the extent of 5% of the total debtors would be provided for. 1. (Book value), To Reconstruction A/c. It is a capital gain and is credited to Forfeited Shares Account. (2) After such subdivision, each shareholder shall surrender to the Company 90% of his holding, for the purpose of re-issue to debenture holders and creditors so far as required, and otherwise for cancellation. All rights reserved. Employers should credit the contra-equity account unearned ESOP shares as the shares are committed to be released, based on the original cost of the shares to the ESOP. Each member firm is a separate legal entity. Surrender of shares is a voluntary return of shares for the purposes of cancellation. Other nonreciprocal transfers of nonmonetary assets to owners shall be accounted for at fair value if the fair value of the nonmonetary asset distributed is objectively measurable and would be clearly realizable to the distributing entity in an outright sale at or near the time of the distribution.

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