A company issued 4,000 equity shares of rupees 50 each at par payable as under: On application 20%, on allotment 40% ; on first call 10% ; on final call -balance Applications were received for 10,000 shares. Allotment was made pro-rata . How much amount will be received in cash on allotment?
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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=Rs30
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 equation
ForfeitureAmount=50shares×Rs30=Rs1,500
ForfeitureAmountfor20share=20shares×Rs30=Rs600
Forfeitureamountonreissue=20shares×Rs10=200
Profit on the reissue is the profit earned by the company when the forfeited shares are reissued
Profitonreissue=ForfeitedAmountonforfeiture−Forfeitedamountonreissue
Substitute the values in the above equation
Profitonreissue=Rs600−Rs200=Rs400
Hence, the profit earned on the reissue of shares is Rs 400.
Share Forfeiture a/c Dr. Rs400
To capital reserve a/c Rs400.
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