Question

A company forfeited 100 equity shares of Rs 100 each issued at a premium of 50% (to be paid at the time of allotment) on which first call money of Rs 30 per share was not received; final call of Rs 20 is yet to be made. These shares were subsequently re-issued at Rs 70 per share as Rs 80 paid up. The Profit on re-issue is ____________.

• A. Rs 5,000,
• B. Rs 4,000,
• C. Rs 2,000,
• D. None of these

Answer 1

The correct option is B Rs 4,000,

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

$ForfeitureAmount=Rs50$

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$ForfeitureAmount=100shares\times Rs50=Rs5000$

$Forfeitureamountonreissue=100shares\times Rs10=1000$

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

$Profitonreissue=Rs5000-Rs1000=Rs4000$

Hence, the profit earned on the reissue of shares is Rs $4000$.