Umpire Ltd. forfeited 50 shares of Rs. 100 each issued at
10% premium (to be paid at the time of allotment) on which
first call of Rs.30 per share was not received, the second
and final call of Rs. 20 per share was not yet called. Out of
these, 20 shares were reissued as Rs.80 paid up for Rs.70
per share. Pass journal entries regarding forfeiture and
reissue of shares.
Answers
Forfeiture amount per share is the amount to be received by the company on forfeiture of each share.
ForfeitureAmount=ApplicationAmount
Substitute the values in above equation
ForfeitureAmount=Rs30
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=50shares×Rs30=Rs1,500
ForfeitureAmountfor20shares=20shares×Rs30=Rs600.
Profit on the reissue is the profit earned by the company when the forfeited shares are reissued
Profitonreissue=ForfeitedAmountonforfeiture
Substitute the values in the above equation
Profitonreissue=Rs600−Rs0=Rs600
Hence, the profit earned on the reissue of shares is Rs 600.
Answered By
Genius