K.N. Ltd. invited applications for issuing 6,00,000 equity shares of Rs. 10 each at a premium of Rs. 3 per share. The amount was payable as follows:

On Application and Allotment Rs. 3 per share.

On First Call Rs. 4 per share.

On Second and Final Call Balance (including premium).

Applications for 8,00,000 shares were received. Applications for 50,000 shares were rejected and the application money was refunded. Shares were allotted to the remaining applicants as follows:

Category I : Those who had applied for 4,00,000 share were allotted 3,00,000 shares on pro-rata basis.

Category II : The remaining applicants were allotted the remaining shares on pro-rata basis.

Excess application money received with applications was adjusted towards sums due on first call. Rakesh to whom 6,000 shares were allotted failed to pay the first call money. Rakesh belonged to category I. His shares were forfeited. The forfeited shares were re-issued at Rs. 13 per share fully paid up. The second call was made afterwards and was duly received.

Pass necessary journal entries for the above transactions in the books of K.N. Ltd. 

Marks-8, CBSE:2019-20/Main/04/Q-21*

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