Pure Products Ltd. is registered with authorised capital of ₹ 10,00,000 divided into 1,00,000 equity shares of ₹ 10 each. It issued 70,000 Equity Shares for subscription of ₹ 2 per share, payable ₹ 3 on application, ₹ 5 on allotment and balance on first and final call. It received application money amounting to ₹ 1,89,000.
You are required to:
(i) Determine whether the company should allot shares; and
(ii) If yes, pass the necessary Journal entries assuming that the company has received due amount on allotment and call.
(i) Minimum subscription is 70,000 × 90% = 63,000 shares. The application is received ₹ 1,89,000
Thus number of shares on which application is received is
1,89,000/3 = 63,000 shares.
Thus the company should allot the shares to the subscribers.