Question

-
Divya Ltd. forfeited 7,000 equity shares of 100 each issued at a
premium of 10%, for non-payment of first and final call of 5 40 per share.
The maximum amount of discount at which these shares can be reissued
will be :
(A) 2,80,000
(B) = 4,20,000
4,90,000
(D) 3,50,000
(C)
​

Answer 1

The answer is explained in simple language with correct option.

Explanation:

The maximum amount of discount at which the share can be reissued is the amount that has been received on these shares. For example if the share is forfeited for the no payment of call money and the total money of application and allotment is 4000 so the maximum amount of discount can not exceed 4000.

Let us calculate according to our question:

Total share = 7000

Premium = 10

Share price = 100+10

Total amount received = $7000\ast 60= 4200000$

So the answer is (B)

You need to note that we calculated with rs 60 per share because at the time of forfeiture we ignore the amount of money received on securites premium. This is why we did not calculate with rs 70