A limited Company forfeited 100 equity shares of the face value of Rs 10 each, Rs 6 per share called up, for non payment of first call of Rs 2 per share. The forfeited shares were subsequently re-issued as fully paid Rs 7 each. The Profit on re-issue is ________.

Rs 400,

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Rs 300,

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Rs 100,

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None of these

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Solution

The correct option is C Rs 100,
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

$F o r f e i t u r e A m o u n t = R s 4$

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

$F o r f e i t u r e A m o u n t = 100 s h a r e s \times R s 4 = R s 400$

$F o r f e i t u r e a m o u n t o n r e i s s u e = 100 s h a r e s \times R s 3 = 300$

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

$P r o f i t o n r e i s s u e = R s 400 - R s 300 = R s 100$

Hence, the profit earned on the reissue of shares is Rs $100$ .

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