Question

Raman Ltd. forfeited 500 shares of 10 each for non-payment of final call of 2 per share. Out of the forfeited shares, 300 shares were re-issued at 12 per share fully paid-up. The amount that was transferred to Capital Reserve Account was:

• A. 2,400
• B. 3,000
• C. 4,000
• D. 5,000

Hint:

Amount transferred to Capital Reserve = Amount forfeited on shares reissued minus any discount on reissue. If issued at premium, full forfeiture is transferred.

Answer 1

The Correct Option is A

Step 1: Face value per share = 10 
Step 2: Amount unpaid on each forfeited share = Final call = 2 
Step 3: Amount received = 8 per share\(\Rightarrow\)Amount forfeited = 8 per share 
Step 4: Total shares forfeited = 500\(\Rightarrow\)Total amount forfeited = \( 500 \times 8 = 4,000 \) 
Step 5: Out of these, 300 shares were reissued at 12 per share (fully paid-up). 
Face value = 10, so 2 per share is premium. 
Step 6: Maximum amount of forfeiture that can be credited to Capital Reserve = amount forfeited on 300 shares 
\(\Rightarrow\) \( 300 \times 8 = 2,400 \) 
Step 7: Since shares were reissued at premium, and fully paid-up, there is no discount absorbed from forfeited amount. Entire 2,400 is credited to Capital Reserve.
Bank A/c Dr. & 3,600 
To Share Capital A/c & 3,000 
To Securities Premium A/c & 600 
Share Forfeiture A/c Dr. & 0 
To Capital Reserve A/c & 2,400