Question

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-

• A. Rs 1,500,
• B. Rs 1,300,
• C. Rs 900,
• D. None of these

Answer 1

The correct option is D None of these

Forfeiture amount per share is the amount to be received by the company on forfeiture of each share.

$Forfeitureamountpershare=Application+Allotment$

Substitute the values in the above equation

$Forfeitureamountpershare=Rs20+Rs30=Rs50$

Forfeiture amount is the money received by the company on forfeiture (cancellation of share) or on the reissue of share.

$ShareForfeitureAmount=SharesForfeited\times Forfeitureamount$

Substitute the values in the above equation

$ShareForfeitureAmountfor50shares=50\times 50=Rs2,500$

$ShareForfeitureAmountfor20shares=20\times 50=Rs1,000$

$ShareForfeitureAmountonreissue=20\times 10=Rs200$

Profit on the reissue is the profit earned by company when the forfeited shares are reissued

$Profitonreissue=Forfeitamountonforfeiture-Forfeitamountonreissue$

Substitute the values in above equation

$Profitonreissue=Rs1000-Rs200=Rs800$

Hence, the profit on the reissue is Rs $800$.