A Ltd. forfeited 4,000 shares of ₹20 each, fully called up on which application money of ₹6 has been paid. Out of these 2,000 shares were reissued and ₹8,000 has been transferred to capital reserve. Calculate the rate at which the forfeited shares are reissued.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) - ₹18 per share.
4000 shares are forfeited. Journal entry for this-
Share capital A/c Dr. 80,000(4,000 x 20)
To Share Allotment A/c ₹56,000 (4000 x 14)
To Share forfeiture A/c ₹24,000 (4000 x 6)
Share forfeiture balance for 4,000 shares = 24,000
For 2,000 shares it will be = 24,000/4,000 x 2,000
= ₹12,000
When these are reissued ₹8,000 will be transferred to capital reserve which means remaining (12,000 -8,000) i.e. ₹4,000 used at discount at time of reissue.
Journal entry for reissue-
Bank A/c Dr. 36,000 (2,000 x 18)
Share forfeiture A/c Dr. 4,000 (2,000 x 2)
To Share Capital A/c ₹40000 (2,000 x 20)
The share are reissued for ₹18 per share.