X Ltd. forfeited 100 shares of Rs 10 each (Rs 8 called up) issued at a premium of 2 per share to Mr. R for non-payment of allotment money of Rs 5 per share (including premium). Out of these 70 shares were re-issued to Mr. Sanjay as Rs 8 called up for Rs 10 per share. The Profit on re-issue is-

Rs 500

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Rs 400

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Rs 350

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None of these

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Solution

The correct option is C Rs 350
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
$F o r f e i t u r e A m o u n t = 100 s h a r e s \times R s 5 = R s 500$
$F o r f e i t u r e A m o u n t f o r 70 s h a r e s = 70 s h a r e s \times R s 5 = R s 350$
$F o r f e i t u r e A m o u n t o n r e i s s u e = 7 s h a r e s \times R s 0 = R s 0$
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
$P r o f i t o n r e i s s u e = R s 350 - R s 0 = R s 350$
Hence, the profit earned on the reissue of shares is Rs $350$ .

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Similar questions

Q. Z Ltd. forfeited 200 shares of Rs 100 each, issued at 10% premium for non-payment of allotment money of Rs 50 per share (including premium), first call of Rs 40 per share and a second and final call of Rs 10 per share. Out of these 80 shares were re-issued as fully paid-up for Rs 95 per share. The Profit on re-issue is __________.

Q. 50 shares of Rs 10 each issued at a premium of Rs 5 each payable with allotment were forfeited for the non payment of allotment money of Rs 9 per share including premium. The first and final call on these shares at Rs 3 per share were not made. The forfeited shares were re-issued @ Rs 12 per share fully paid up. The profit on re-issue is-

Q. ABC Ltd. forfeited 3,200 shares of Rs 100 each issued at 10% premium for non-payment of allotment money of Rs 40 per share (including premium) and first call of Rs 30 per share. The second and final call of Rs 20 has not yet been called. Out of these 1,280 shares were re-issued as Rs 80 paid-up fort 70 per share. The Profit on re-issue is _________.

Give Journal entries for forfeiture and re-issue of shares:

(i) A Ltd. forfeited 1,000 shares of Rs 10 each, Rs 7 called up, issued at a premium of 20% (to be paid at the time of allotment) for non-payment of a first call of Rs 2 per share. Out of these, 600 shares were re-issued as Rs 7 paid up for Rs 4 per share.

(ii) B Ltd. forfeited 1,000 shares of Rs 10 each, Rs 7 called up, issued at a premium of 20% (to be paid at the time of allotment) for non-payment of allotment money of Rs 4 per share (including premium) and first call of Rs 2 per share. Out of these, 600 shares were re-issued as fully paid in such a way that Rs 900 were transferred to capital reserve.

Q. R Ltd. forfeited 60 shares of Rs 10 each issued at a premium of 20% to Mr. Mohan who had applied for 72 shares, for non-payment of allotment money of Rs 5 per share (including premium) and the first and final call of Rs 5 per share. Out of these, 20 shares were re-issued to Krishan, credited as fully paid for Rs 9 per share, the Profit on re-issue is _____________.

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