Question

Sarita Ltd. forfeited 100 shares of Rs.10 each, Rs.8 called up issued at a premium of Rs.2 per share to Ramesh for non-payment of allotment money of Rs.5 per share (including premium). The first and final call of Rs.2 per share was not made. Out of these 70 shares were reissued to Ashok as Rs.8 called up for Rs.10 per share. The gain on reissue will be:

• A. Rs.500
• B. Rs.400
• C. Rs.350
• D. Rs.300

Hint:

To calculate gain on reissue, always subtract the unpaid amount from the forfeited amount and multiply it by the number of shares reissued.

Answer 1

The Correct Option is C

Step 1: Calculate the forfeited amount per share:
The total amount called up per share is Rs.8. Ramesh paid Rs.3 before forfeiture, so the amount forfeited per share is: \[ {Forfeited Amount per Share} = Rs.8 - Rs.3 = Rs.5. \] Step 2: Total amount forfeited for 70 shares:
The forfeited amount for 70 shares is: \[ {Total Forfeited Amount} = Rs.5 \times 70 = Rs.350. \] Step 3: Determine the reissue price and gain:
The shares were reissued to Ashok at Rs.10 per share. Since the shares were reissued at the called-up value of Rs.8, the gain on reissue equals the total amount forfeited: \[ {Total Gain on Reissue} = Rs.350. \] Conclusion:
The gain on reissue of shares is \( Rs.350 \).