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 journal entry on the forfeiture of shares-
Share Capital A/c Dr. ₹4,000 (400 x 10)
To Share forfeiture A/c ₹1,600 (400 x 4)
To share call A/c ₹2,400 (400 x 6)
(Shares forfeited)
The journal entry on the reissue of shares-
Bank A/c Dr. ₹3,000 (400 x 7.5)
Share forfeiture A/c ₹1,000 (400 x 2.5)
To share capital A/c ₹4,000 (400 x 10)
(Reissue of shares)
Amount available in share forfeiture = 1,600
Amount used in reissue = 1,000
Amount transferred to capital reserve = 1,600 - 1,000
= ₹600