Question

3. On forfeiture of 100 shares of 50 each, 2,500 were credited to share forfeited
account. These shares were re-issued at 25 per share fully paid up. The
amount credited to 'Capital Reserve Account' will be:
(a) 2,500 (b) 5,000 (c) No amount d) 3,000​

Answer 1

Answer:

Saranya Kambale

A company forfeited 100 equity shares of Rs. 100 each issued at premium of 50% (to be paid at the time of allotment) on which the first call money of Rs. 30 per share was not received, final call Rs. 20 is yet to be made. These shares were subsequently reissued @ Rs. 70 per share at Rs. 80 paid up. The amount credited to capital reserve is?

A

4000

B

2000

C

3000

D

None

ANSWER

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=Rs50

Forfeiture amount is the money received by company on forfeiture (cancellation of share) or on the reissue of share.

ForfeitureAmount=No.ofshares×ForfeitureAmount

Substitute the values in the above equationForfeitureAmount=100shares×Rs50=Rs5000

Forfeitureamountonreissue=100shares×Rs10=Rs1000

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=Rs5000−Rs1000=Rs4000

Hence, the profit earned on the reissue of shares is Rs 4000 and credited to capital reserve account.