Question

ABC Ltd. forfeited 3,200 shares of Rs 100 each issued at 10% premium for non-payment of allotment money of Rs 40 per share (including premium) and first call of Rs 30 per share. The second and final call of Rs 20 has not yet been called. Out of these 1,280 shares were re-issued as Rs 80 paid-up fort 70 per share. The Profit on re-issue is _________.

• A. Rs 3,200,
• B. Rs 19,200,
• C. Rs 12,800,
• D. None of these

Answer 1

Answer: (C)

Rs 12,800,

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

$ForfeitureAmount=Rs20$

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

$ForfeitureAmount=3200shares\times Rs20=Rs64,000$

$ForfeitureAmountfor1280shares=1280shares\times Rs20=Rs25,600$

$ForfeitureAmountonreissue=1280shares\times Rs10=Rs12,800$

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

$Profitonreissue=Rs25,600-Rs12,800=Rs12,800$

Hence, the profit earned on the reissue of shares is Rs $12,800$.

Share forfeiture a/c Dr Rs12,800

To share capital a/c Rs12,800.