Question

100 shares of Rs 100 each issued at a discount of 10% were forfeited for the non payment of allotment money of Rs 50 per share. The first and final call on these shares at Rs 20 per share were not made. The forfeited shares were re-issued for Rs 7,000 fully paid up. The profit on re-issue is-

• A. Rs 2,000
• B. Rs 1,000
• C. Nil
• D. None of these

Answer 1

The correct option is C Nil

Forfeiture amount per share is the amount to be received by the company on forfeiture of each share.

$ForfeitureAmount=ApplicationAmount+Discount$

Substitute the values in above equation

$ForfeitureAmount=Rs30$

Forfeiture amount is the money received by company on forfeiture (cancellation of share) or on the reissue of share.

$ForfeitureAmount=No.ofshares\times ForfeitureAmount$

Substitute the values in the above equation

$ForfeitureAmount=100shares\times Rs30=Rs3000$

$Forfeitureamountonreissue=100shares\times Rs30=Rs3000$

Profit on the reissue is the profit earned by the company when the forfeited shares are reissued

$Profitonreissue=ForfeitedAmountonforfeiture$

Substitute the values in the above equation

$Profitonreissue=Rs3000-Rs3000=Rs0$

Hence, the profit earned on the reissue of shares is Rs $0$.