The directors of a company forfeited 400 equity shares of ₹10 each fully called up on which ₹1,600 had been paid. All the forfeited shares were reissued upon payment of ₹3,000. Calculate the amount transferred to Capital Reserve.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹600
The amount forfeited on the shares, less the discount allowed when they are reissued, is the capital profit transferred to Capital Reserve.
Amount forfeited on 400 shares = ₹1,600
Face value of 400 shares = 400 × ₹10 = ₹4,000
Discount on reissue = ₹4,000 − ₹3,000 = ₹1,000
Transferred to Capital Reserve = ₹1,600 − ₹1,000 = ₹600