A company forfeited $100$ equity shares of Rs. $100$ each issued at premium of $50 %$ (to be paid at the time of allotment) on which the first call money of Rs. $30$ per share was not received, final call Rs. $20$ is yet to be made. These shares were subsequently reissued $@$ Rs. $70$ per share at Rs. $80$ paid up. The amount credited to capital reserve is?

4000

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2000

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3000

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None

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Solution

The correct option is A $4000$
Forfeiture amount per share is the amount to be received by the company on forfeiture of each share.
$F o r f e i t u r e A m o u n t = A p p l i c a t i o n A m o u n t$
Substitute the values in above equation
$F o r f e i t u r e A m o u n t = R s 50$
Forfeiture amount is the money received by company on forfeiture (cancellation of share) or on the reissue of share.
$F o r f e i t u r e A m o u n t = N o . o f s h a r e s \times F o r f e i t u r e A m o u n t$
Substitute the values in the above equation $F o r f e i t u r e A m o u n t = 100 s h a r e s \times R s 50 = R s 5000$
$F o r f e i t u r e a m o u n t o n r e i s s u e = 100 s h a r e s \times R s 10 = R s 1000$
Profit on the reissue is the profit earned by the company when the forfeited shares are reissued
$P r o f i t o n r e i s s u e = F o r f e i t e d A m o u n t o n f o r f e i t u r e$
Substitute the values in the above equation
$P r o f i t o n r e i s s u e = R s 5000 - R s 1000 = R s 4000$
Hence, the profit earned on the reissue of shares is Rs $4000$ and credited to capital reserve account.

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