Question

Shiv Ltd. forfeited 500 shares of \rupee10 each on which \rupee7 per share was paid. These shares were reissued for \rupee9 per share fully paid. Amount transferred to Capital Reserve Account will be:

• A. \rupee3,000
• B. \rupee5,000
• C. \rupee4,500
• D. \rupee3,500

Hint:

Profit on reissue of forfeited shares is transferred to the Capital Reserve Account.

Answer 1

The Correct Option is D

Total paid-up value before forfeiture: \rupee7 × 500 = \rupee3,500. Reissued price: \rupee9 × 500 = \rupee4,500. Total value of the shares: \rupee10 × 500 = \rupee5,000. Excess amount received (profit on reissue) transferred to Capital Reserve = \rupee5,000 - \rupee4,500 = \rupee3,500.