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 ____________.

Rs 2,500,

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Rs 2,300,

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Rs 1,500,

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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.
$F o r f e i t u r e A m o u n t = A p p l i c a t i o n A m o u n t + A l l o t m e n t A m o u n t$
Substitute the values in above equation
$F o r f e i t u r e A m o u n t = R s 30 + R s 30 = R s 60$
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
$F o r f e i t u r e A m o u n t = 50 \times 60 = R s 3000$
$F o r f e i t u r e f o r 20 s h a r e s = 20 \times 60 = R s 1200$
$F o r f e i t u r e A m o u n t f o r r e i s s u e d s h a r e s = 20 \times 50 = R s 1000$
Profit on the reissue is the profit earned by the company when the forfeited shares are reissued
$P r o f i t o n r e i s s u e = F o r f e i t e d A m o u n t o n f o r f e i t u r e - F o r f e i t e d a m o u n t o n r e i s s u e$
Substitute the values in the above equation
$P r o f i t o n r e i s s u e = R s 1200 - R s 1000 = R s 200$
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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