Question

Mother Ltd. forfeited 100 equity shares of Rs 10 each issued at a discount of 10% for nonpayment of first call of Rs 2 per share and the final call of Rs 3 per share on 31st March. 50 forfeited shares were re-issued as fully paid for Rs 8 per share and balance of the shares were re-issued on 30th June at Rs 7 per share. The Profit on re-issue is ________.

• A. Rs 400
• B. Rs 150,
• C. Rs 100
• D. Rs 250

Answer 1

The correct option is D Rs 250

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

$ForfeitureAmount=ApplicationAmount+Discount$

Substitute the values in above equation

$ForfeitureAmount=Rs5$

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$ForfeitureAmount=100shares\times Rs5=Rs500$

$ForfeitureAmountfor80share=80shares\times Rs3=Rs240$

$Forfeitureamountonreissue=50shares\times Rs2+50shares\times Rs3=Rs250$

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

$Profitonreissue=ForfeitedAmountonforfeiture$

Substitute the values in the above equation

$Profitonreissue=Rs500-Rs250=Rs250$

Hence, the profit earned on the reissue of shares is Rs $250$.