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Estimation Using Percentages in Situations

Z Co. forfe...

Question

Z & Co. forfeited $100$ shares of Rs. $10$ each for non-payment of final call of Rs. $2$ per shares. All shares were reissued at Rs. $9$ per share. What amount will be transferred to Capital reserve A/c?

A

Rs.

700

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B

Rs.

800

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C

Rs.

900

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D

Rs.

1000

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Solution

The correct option is A Rs. $700$
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
$F o r f e i t u r e A m o u n t = R s 8$
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
$F o r f e i t u r e A m o u n t = 100 s h a r e s \times R s 8 = R s 800$
$F o r f e i t u r e a m o u n t o n r e i s s u e = 100 s h a r e s \times R s 1 = R s 100$
Profit on the reissue is the profit earned by the company when the forfeited shares are reissued and transferred to capital reserve account
$P r o f i t o n r e i s s u e = F o r f e i t e d A m o u n t o n f o r f e i t u r e + F o r f e i t e d A m o u n t o n r e i s s u e$
Substitute the values in the above equation
$P r o f i t o n r e i s s u e = R s 800 - R s 100 = R s 700$
Hence, the amount credited to capital reserve accountis Rs $700$ .

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