. New India Ltd. forfeited 100 shares of Rs. 10 each, issued at a discount of 10%. The company had called up only Rs. 8 per share. Final call of Rs. 2 each has not been made on these shares. These shares were allotted to Ram, who did not pay the first call of Rs. 3. 60 shares were reissued at Rs. 7 per share, as Rs. 8 paid up. Give Journal entries in the books of the company, showing the working clearly
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=100shares×Rs5=Rs500
ForfeitureAmountfor70shares=70shares×Rs5=Rs350
ForfeitureAmountonreissue=7shares×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=Rs350−Rs0=Rs350
Hence, the profit earned on the reissue of shares is Rs 350.