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Question

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 ____________.

A
Rs 2,500,
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B
Rs 2,300,
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C
Rs 1,500,
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D
Rs 1,000,
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Solution

The correct option is D Rs 1,000,

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=Rs30+Rs30=Rs60

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

ForfeitureAmount=No.ofshares×ForfeitureAmount

Substitute the values in the above equation

ForfeitureAmount=50×60=Rs3000

Forfeiturefor20shares=20×60=Rs1200

ForfeitureAmountforreissuedshares=20×50=Rs1000

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

Profitonreissue=ForfeitedAmountonforfeitureForfeitedamountonreissue

Substitute the values in the above equation

Profitonreissue=Rs1200Rs1000=Rs200

Hence, the profit earned on the reissue of shares is Rs 200

Share forfeiture a/c Dr Rs200

To capital reserve a/c Rs200


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