Question

C 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 70 per share, the Profit on re-issue is __________.

• A. Rs 1,500,
• B. Rs 1,300,
• C. Rs 900,
• D. Rs 400,

Answer 1

The correct option is D Rs 400,

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

$ForfeitureAmount=Rs30$

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

$ForfeitureAmount=50shares\times Rs30=Rs1,500$

$ForfeitureAmountfor20share=20shares\times Rs30=Rs600$

$Forfeitureamountonreissue=20shares\times Rs10=200$

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

$Profitonreissue=Rs600-Rs200=Rs400$

Hence, the profit earned on the reissue of shares is Rs $400$.

Share Forfeiture a/c Dr. Rs400

To capital reserve a/c Rs400.