Question

The forfeited shares may be re-issued:-
(I) At par only
(II) At par or premium only
(III) At par or at discount only
(IV) At or par at premium or at discount
The correct answer is :

• A. (II)
• B. (III)
• C. (I)
• D. (IV)

Answer 1

The correct option is D (IV)

Reissue of Forfeited Shares:-

Reissue of forfeited shares is not the allotment of shares, but it is only a re-sale. A company can reissue forfeited shares in accordance with the provisions contained in the articles. The forfeited shares can be reissued at a discount, but the maximum discount should not exceed the amount available in the share forfeiture account.

• If the shares re issued at discount

When shares are reissued at a loss, then such a loss should be debited to the share forfeiture account. If the loss on reissue is less than the amount forfeited, then the excess should be transferred to the capital reserve account.

• If the shares re issued at premium

If the shares are reissued at a price more than face value, then the excess should be credited to the securities premium account.

When only a portion of shares is reissued, only the profit made on the reissue of such shares must be transferred to the capital reserve account.

• If the shares are re issued at par

When the shares re issued at the same value as the face value then they are issued at par.