Question

National Heavy Chemicals Ltd. issued 5,000 shares of Rs 10 each at a premium of Rs 2 per share for public subscription, payable as Rs 5 on Application and Rs 7 on allotment (including premium). Rajesh who was allotted 200 shares by the Company failed to pay the allotment amount and his shares were forfeited by the Company. 100 out of these forfeited shares were allotted to Brijesh as fully paid up for Rs 8 per share. The Profit on re-issue is ____________.

• A. Rs 1,000
• B. Rs 800
• C. Rs 300
• D. None of these

Answer 1

The correct option is C Rs 300

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

$ForfeitureAmount=ApplicationAmount$

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

$ForfeitureAmount=200shares\times Rs5=Rs1000$

$ForfeitureAmountfor100share=100shares\times Rs5=Rs500$

$Forfeitureamountonreissue=100shares\times Rs2=200$

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

$Profitonreissue=ForfeitedAmountonforfeiture-Forfeitedamountonreissue$

Substitute the values in the above equation

$Profitonreissue=Rs500-Rs200=Rs300$

Hence, the profit earned on the reissue of shares is Rs $300$.

Share Forfeiture a/c Dr. Rs300

To share capital a/ Rs300.