Question

1000 shares of Rs 10 each issued at par were forfeited for the non payment of the final call of Rs 2 per share. These shares were re-issued @ Rs 8 per share fully paid up. The Profit on re-issue is _________.

• A. Rs 8,000
• B. Rs 6,000
• C. Rs 4,000
• D. None of these

Answer 1

The correct option is B Rs 6,000

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

$ForfeitureAmount=ApplicationAmount+AllotmentAmount$

Substitute the values in above equation

$ForfeitureAmount=Rs8$

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

$ForfeitureAmount=1000shares\times Rs8=Rs8,000$

$Forfeitureamountonreissue=1000sahres\times Rs2=Rs2,000$

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

$Profitonreissue=ForfeitedAmountonforfeiture+ForfeitedAmountonreissue$

Substitute the values in the above equation

$Profitonreissue=Rs8,000-Rs2,000=Rs6,000$

Hence, the profit n reissue is Rs $6,000$.