Question

LN Ltd. forfeited 200 shares of ₹10 each. The amount forfeited was ₹1,400. What will be the maximum amount of discount per share at which these shares can be reissued?

• A. ₹1
• B. ₹7
• C. ₹3
• D. ₹4

Hint:

Maximum discount on reissue = Amount forfeited per share. Always calculate it before deciding reissue price.

Answer 1

The Correct Option is B

To determine the maximum amount of discount per share at which the shares can be reissued, we need to understand the concept of share forfeiture and reissue in accountancy. When a company's shares are forfeited, it means the shareholder has failed to pay the due amount, and the company has taken back the shares. Later, these shares can be reissued, often at a discount.

Here, LN Ltd. forfeited 200 shares, each of ₹10, collecting a total amount of ₹1,400 upon forfeiture. This means:

Amount paid by shareholder per share = Total amount forfeited / Number of shares forfeited

Amount paid per share = ₹1,400 / 200 = ₹7

This ₹7 represents the amount already received on each forfeited share. Hence, the maximum discount allowable on reissue of one share is the amount received on forfeiture per share, since no more than this had been paid by the original shareholder.

Therefore, the maximum discount per share = ₹7

The reissued shares cannot be offered at a discount greater than this amount to ensure that the company doesn’t incur a loss on its original share value.

Thus, the correct answer is ₹7.