Q) Sudip Ltd. forfeited 100 shares of Rs. 10 each, issued at a discount of
10%. The company has 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 Sayan who did
not pay the first call of Rs. 2 per share. 80 of these shares were re-issued 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.