Question

50 shares of Rs 10 each issued at a premium of Rs 5 each payable with allotment were forfeited for the non payment of allotment money of Rs 9 per share including premium. The first and final call on these shares at Rs 3 per share were not made. The forfeited shares were re-issued @ Rs 12 per share fully paid up. The profit on re-issue is-

• A. Rs 150,
• B. Rs 100,
• C. Rs 50,
• D. None of these

Answer 1

The correct option is A Rs 150,

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

$ForfeitureAmount=ApplicationAmount$

Substitute the values in above equation

$ForfeitureAmount=Rs3$

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$ForfeitureAmount=50shares\times Rs3=Rs150$

$Forfeitureamountonreissue=50shares\times Rs12=Rs600$

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

$Profitonreissue=Rs150=Rs510$

Hence, the profit earned on the reissue of shares is Rs $150$.