A Ltd forfeited 20 shares of ₹ 10 each ₹ 7 called up, on which Mr. Kumar had paid
application and allotment money of ₹ 5 per share. Of these, 15 shares were reissued to
Mr. Ragu as fully paid up for ₹ 6 per share. Give necessary journal entries.
Answers
Answer:
Forfeiture amount per share is the amount to be received by the company on forfeiture of each share.
ForfeitureAmount=ApplicationAmount+AllotmentAmount
Substitute the values in above equation
ForfeitureAmount=Rs5
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=20shares×Rs5=Rs100
ForfeitureAmountfor15shares=15shares×Rs5=Rs75
ForfeitureAmountonreissue=15shares×Rs0=Rs0
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=Rs75−Rs0=Rs75
Hence, the profit earned on the reissue of shares is Rs 75.
Share forfeiture a/c Dr Rs75
To share capital a/c Rs75.
Explanation:
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