A company forfeited 1000 shares of 10 each of fully called on which Rs. 6000 has been paid.out of these 800 shares were reissued upon payment of Rs. 6600. what is the amount to be transferred to capital reserve. a) Rs. 4800 b) Rs. 6000 c) Rs. 4600 d) Rs. 3400
Answers
Answer:
Amount credited in share forfeiture =6000
profit on 1000share is 600)
profit on 800 share is 6000/1000×800=4800
800 shares of face value 8000 are issued for 7000 therefore loss on reissue 1000
amount transferred to capital reserve
= 4800-1000= 3800
Concept:
Reissue of Forfeited shares-
Shares are forfeited when only a portion of the due amount is received and the remainder remains unpaid.
The membership of the original allottee is cancelled upon forfeiture. He or she cannot be forced to pay the remaining balance.
Such shares become the company's property. As a result, the company may sell these shares.
This type of share sale is known as a "reissue of shares."
Given:
Shares forfeited - 1000 of Rs 10 each fully called
Amount paid = 6000
Shares reissued - 800
payment on reissue of shares = 6600
Find:
Amount to be transfered to capital account.
Solution:
Amount forfeited for 1000 shares= 6000
Amount forfeited for 800 shares = 6000/1000 x 800 = 4800
Face value of 800 shares = 8000
Payment received on reissue of 800 shares = 6600
Loss on reissue = 8000-6600= 1400
This amount loss of 1400 will be compensated by forfeiture account and rest amount will be transferred to capital reserve.
Amount to be transferred to capital reserve = 4800 - 1400 = 3400
Hence, the amount to be transferred to the capital reserve is the amount not utilized towards the reissue of forfeited shares. Here, the amount not utilized is 3400 therefore it will be transferred to capital reserve.
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