The directors of a company resolved that 400 shares of ₹100 each be forfeited for non-payment of final call of ₹30 per share. Out of these, 300 shares were reissued at ₹60 per share. What will be the balance in Shares Forfeited Account after reissue of shares?
Answer & explanation
Correct answer: option 2
The correct answer is Option 2 - ₹7,000.
On forfeiture of shares amount received is credited in the share forfeiture account.
Journal entry on forfeiture of shares-
Share Capital A/c Dr. 40,000 (400 x 100) called up amount
To share forfeiture A/c 28,000 (400 x 70) received amount
To share final call A/c 12,000 (400 x 30) Not received amount
Journal entry for reissue of shares-
Bank A/c Dr. (300x 60) ₹18,000
Share forfeiture A/c Dr. (300 x 40) ₹12,000
To Share Capital A/c (300 x 100) ₹30,000
Share forfeiture balance on 400 shares = 28,000
Share forfeiture balance on 300 shares = 28,000/400 x 300
= 21,000
Share forfeiture Balance used in reissue = 12,000
Remaining balance under Share forfeiture after reissue = 21,000 - 12,000
= 9,000
This balance of ₹9,000 of Share forfeiture will be transferred to capital reserve.
* Balance left in the share forfeiture account will be related to those shares which have not been reissued by the company. So, amount forfeited on 300 shares = 21,000
Therefore, forfeited amount on 100 shares = 28,000 - 21,000
= 7,000