If all the forfeited shares are reissued at ₹30 per share, fully paid-up, the amount transferred to 'Capital Reserve' will be:
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Amount transferred to Capital Reserve = Share Forfeiture before reissue - Loss on reissue.
Loss on reissue = (Face value - Reissue price) × Number of shares reissued.
If loss equals the Share Forfeiture amount, Capital Reserve = Nil.
We need to find the amount transferred to Capital Reserve when forfeited shares are reissued at ₹30 per share. Step 1: Recall the amount in Share Forfeiture Account.
From part (iv), Share Forfeiture Account balance = ₹49,000 (for 700 shares at ₹70 each)
Step 2: Understand the reissue terms.
Reissue price = ₹30 per share
Face value = ₹100 per share
Shares are reissued as fully paid-up
Step 3: Calculate the loss on reissue.
Loss on reissue per share = Face value - Reissue price = ₹100 - ₹30 = ₹70 per share
Total loss on reissue = 700 × ₹70 = ₹49,000
Step 4: Adjust the loss against Share Forfeiture Account.
The loss on reissue is adjusted against the Share Forfeiture Account. The journal entry for reissue would be:
\[
\begin{array}{ll}
\text{Bank A/c} & \text{Dr.} \quad 21,000 \quad (700 \times 30) \\
\text{Share Forfeiture A/c} & \text{Dr.} \quad 49,000 \\
\quad \text{To Share Capital A/c} & 70,000 \quad (700 \times 100)
\end{array}
\]
Step 5: Determine the balance in Share Forfeiture Account after reissue.
Before reissue: Share Forfeiture balance = ₹49,000
After reissue: ₹49,000 debited (used to cover loss)
Balance after reissue = ₹49,000 - ₹49,000 = Nil
When the balance in Share Forfeiture Account becomes zero after adjusting the loss on reissue, nothing is transferred to Capital Reserve.
Step 6: When is Capital Reserve created?
Capital Reserve is created only if there is a surplus in Share Forfeiture Account after adjusting the loss on reissue. That is:
\[
\text{Transfer to Capital Reserve} = \text{Share Forfeiture before reissue} - \text{Loss on reissue}
\]
Here, Share Forfeiture = ₹49,000, Loss on reissue = ₹49,000, so surplus = 0.
Therefore, no amount is transferred to Capital Reserve.
Final Answer: (D) Nil
