Question

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Answer 1

Answer:

The directors of M Ltd, resolved that 2,000 equity shares of Rs 10 each Rs 7.50 paid be forfeited for non-payment of final call of Rs 2.50. 1,800 of these shares were re-issued as fully paid for Rs 6 per share. The Profit on re-issue is __________.

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Solution

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Correct option is C)

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=Rs7.50

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=2000shares×Rs7.50=Rs15000

ForfeitureAmountfor1800shares=1800shares×Rs7.50=Rs13,500

ForfeitureAmountonreissue=1800shares×Rs4=Rs7,200

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=Rs13,500−Rs7,200=Rs6,300

Hence, the profit earned on the reissue of shares is Rs 6,300.

Share forfeiture a/c Dr. Rs6,300

To share capital a/c Rs6,300.