Question

X limited forfeited 100 shares (Rs 6 called up) issued at a discount of 10% to Mahesh on which he had paid Rs 2 per share. Out of these 80 shares were reissued at Rs 6 per share to Suresh, Rs 8 paid up. The Profit on re-issue is __________.

• A. Rs 200
• B. Rs 120
• C. Rs 80
• D. Nil

Answer 1

The correct option is D Nil

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

$ForfeitureAmount=Rs3$

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$ForfeitureAmount=100shares\times Rs3=Rs300$

$ForfeitureAmountfor80share=80shares\times Rs3=Rs240$

$Forfeitureamountonreissue=80shares\times Rs2=Rs160$

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

$Profitonreissue=Rs240-Rs160=Rs80$

Hence, the profit earned on the reissue of shares is Rs $80$.