AH Ltd. forfeited 500 shares of Rs 10 each on which first call of Rs 3 per share was not received, the second and final call of Rs 2 per share has not yet been called. Out of these 125 shares were re-issued to I as Rs 8 paid-up for Rs 7 per share. The Profit on re-issue is _______.

Rs 2,500

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Rs 2,375

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Rs 500

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None of these

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Solution

The correct option is C Rs 500
Forfeiture amount per share is the amount to be received by the company on forfeiture of each share.
$F o r f e i t u r e A m o u n t = A p p l i c a t i o n A m o u n t + A l l o t m e n t A m o u n t$
Substitute the values in above equation
$F o r f e i t u r e A m o u n t = R s 5$
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
$F o r f e i t u r e A m o u n t = 500 s h a r e s \times R s 5 = R s 2500$
$F o r f e i t u r e A m o u n t f o r 125 s h a r e s = 125 s h a r e s \times R s 5 = R s 625$
$F o r f e i t u r e A m o u n t o n r e i s s u e = 125 s h a r e s \times R s 1 = R s 125$
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
$P r o f i t o n r e i s s u e = R s 625 - R s 125 = R s 500$
Hence, the profit earned on the reissue of shares is Rs $500$ .

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Similar questions

Pass journal entries for the Forfeiture and Re-issue in the following cases:

(a) X Ltd. forfeited 200 shares of Ravi of Rs 10 each Rs 8 called up, on which he had paid application and allotment money of Rs 3 per share. Out of these, 100 shares were re-issued as fully paid up for Rs 8 per share.

(b) Y Ltd. forfeited 300 shares of Rs 10 each, Rs 7 called up, for non-payment of First Call of Rs 2 per share. Out of these, 100 shares were immediately re-issued at Rs 6 per share.

(c) Z Ltd. forfeited 600 shares of Rs 10 each, on which first call of Rs 3 per share was not received; the second and final call of Rs 2 per share has not yet been called. Out of these, 200 shares were re-issued as Rs 8 paid-up for Rs 7 per share.

Q. MIG Ltd. forfeited 80 shares of Rs 10 each, issued at a discount of 10% for non-payment of first call of Rs 2 per share. The second and final call of Rs 3 per share has not yet been called. Out of these, 20 shares were re-issued as Rs 7 paid-up for Rs 5 per share. The Profit on re-issue is _________.

Q. A Ltd. forfeited 50 shares of Rs 100 each issued at 10% premium on which allotment money of Rs 30 per share (including premium) and first call of Rs 30 per share were not received, the second & final call of Rs 20 per share was not yet called. If 20 of these shares were re-issued as Rs 80 paid-up for Rs 90 per share, the Profit on re-issue is ____________.

Q. I Ltd. forfeited 50 shares of Rs 100 each issued at 10% premium (to be paid at the time of allotment) on which first call of Rs 30 per share was not received, the second & final call of Rs 20 per share was not yet called. If 20 of these shares were re-issued as Rs 80 paid-up for Rs 30 per share, the Profit on re-issue is ____________.

Q. E Ltd. forfeited 50 shares of Rs 100 each issued at 10% premium on which allotment money of Rs 30 per share (including premium) and first call of Rs 30 per share were not received, the second & final call of Rs 20 per share was not yet called. If 20 of these shares were re-issued at Rs 70 per share as fully paid-up, the Profit on re-issue is-

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