company forteited 500 sahres of raj for the nonpayment of allotment money Rs 4 before making final call money Rs 2 per share. These shares are re-issued at maximum permissible discount. write journal entries of forfeited and re-issue of shares.
Answers
Re-issue of Forfeited Shares
Forfeited shares are available with the company for sale. After the forfeiture of shares, the company is under an obligation to dispose off the forfeited shares.
The company requires to pass a resolution in its Board Meeting for the re-issue of forfeited shares. Re-issue of forfeited shares is a mere sale of shares for the company. A company does not make allotment of these shares.
The company auctions the forfeited shares and disposes them off. A company can re-issue these shares at any price but the total amount received on these shares should not be less than the amount in arrears on these shares. Here, total amount refers to the amount received from the original allottee and the second purchaser.
For example, A pays the application amount of ₹3 on 100 shares of the face value ₹10. But, he fails to pay the allotment money. The company forfeits his shares and re-issues them. Now, the amount in arrear is ₹7 per share. The company can re-issue the shares at ₹7 or more. Thus, it cannot issue shares at a price less than ₹7.