Question

Alok Ltd. forfeited 300 shares of Rs 10 each, fully called up, held by Ram for non payment of allotment money of Rs 3 per share and final call money of Rs 4 per share. Out of these shares 250 were re-issued to Shyam for a total payment of Rs 2,000. The Profit on re-issue is-

• A. Rs 900,
• B. Rs 400,
• C. Rs 750,
• D. Rs 250,

Answer 1

The correct option is D Rs 250,

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

$ForfeitureAmount=Rs3$

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

$ForfeitureAmount=300shares\times Rs3=Rs900$

$ForfeitureAmountfor250share=250shares\times Rs3=Rs750$

$Forfeitureamountonreissue=250shares\times Rs2=500$

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

$Profitonreissue=Rs750-Rs500=Rs250$

Hence, the profit earned on the reissue of shares is Rs $250$.