MIG Ltd. forfeited 80 shares of Rs 10 each, issued at a discount of 10% for non-payment of first call of Rs 2 per share. The second and final call of Rs 3 per share has not yet been called. Out of these, 20 shares were re-issued as Rs 7 paid-up for Rs 5 per share. The Profit on re-issue is _________.

Rs 320

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Rs 280

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Rs 60

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None of these

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Solution

The correct option is C Rs 60
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
$F o r f e i t u r e A m o u n t = R s 5$
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
$F o r f e i t u r e A m o u n t = 80 s h a r e s \times R s 5 = R s 400$
$F o r f e i t u r e A m o u n t f o r 20 s h a r e s = 20 s h a r e s \times R s 5 = R s 100$
$F o r f e i t u r e A m o u n t o n r e i s s u e = 20 s h a r e s \times R s 2 = R s 40$
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
$P r o f i t o n r e i s s u e = R s 100 - R s 40 = R s 60$
Hence, the profit earned on the reissue of shares is Rs $60$ .

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