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ABC limited issued 20000 equity shares of 10 each payable as 2 on application, 3 on allotment , 4 on first call , 1 on final call . All the shares were subscribed . Money due on all shares was fully received except for Mr. Bird holding 300 shares who failed to pay first and final call money. All those 300 shares were forfeited . The forfeited shares of Mr. Bird were subsequent ly re-issue to Mr. John as fully paid up at a discount 2 per share?
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ABC limited issued 20000 equity shares of 10 each payable as 2 on appl...
Solution:
Forfeiture of shares:
When a shareholder fails to pay the call money on shares, the company has the right to forfeit the shares. Forfeiture means cancellation of shares and the shareholder loses all rights and privileges associated with the shares.
Reissue of forfeited shares:
The forfeited shares can be reissued by the company. The reissued shares can be sold at a discount or at a premium. In this case, the forfeited shares of Mr. Bird were reissued to Mr. John at a discount of 2 per share.
Calculation of calls made and calls in arrears:
The calls made and calls in arrears for the shares are as follows:
Calls made:
Application money: 2 per share
Allotment money: 3 per share
First call money: 4 per share
Final call money: 1 per share
Total calls made: 2 + 3 + 4 + 1 = 10 per share
Calls in arrears:
Mr. Bird failed to pay the first and final call money on 300 shares.
Amount due on 300 shares: (4 + 1) x 300 = 1500
Reissue of forfeited shares:
The forfeited shares of Mr. Bird were reissued to Mr. John at a discount of 2 per share. The amount received on the reissue of shares is as follows:
Number of forfeited shares: 300
Discount per share: 2
Amount received on reissue: 300 x (10 - 2) = 2400
Adjustment for calls in arrears:
The amount received on the reissue of shares is more than the amount due on the calls in arrears. Therefore, the excess amount received is treated as capital profit.
Amount due on calls in arrears: 1500
Amount received on reissue: 2400
Excess amount received: 2400 - 1500 = 900
Treatment of excess amount received:
The excess amount received on the reissue of shares is treated as capital profit. The capital profit is transferred to the capital reserve account.
Journal entry for reissue of forfeited shares:
Bank account Dr. 2400
Share forfeiture account Cr. 2000
Capital reserve account Cr. 400
Conclusion:
Thus, the forfeited shares of Mr. Bird were reissued to Mr. John at a discount of 2 per share. The excess amount received on the reissue of shares is treated as capital profit and transferred to the capital reserve account.
Forfeiture of shares:
When a shareholder fails to pay the call money on shares, the company has the right to forfeit the shares. Forfeiture means cancellation of shares and the shareholder loses all rights and privileges associated with the shares.
Reissue of forfeited shares:
The forfeited shares can be reissued by the company. The reissued shares can be sold at a discount or at a premium. In this case, the forfeited shares of Mr. Bird were reissued to Mr. John at a discount of 2 per share.
Calculation of calls made and calls in arrears:
The calls made and calls in arrears for the shares are as follows:
Calls made:
Application money: 2 per share
Allotment money: 3 per share
First call money: 4 per share
Final call money: 1 per share
Total calls made: 2 + 3 + 4 + 1 = 10 per share
Calls in arrears:
Mr. Bird failed to pay the first and final call money on 300 shares.
Amount due on 300 shares: (4 + 1) x 300 = 1500
Reissue of forfeited shares:
The forfeited shares of Mr. Bird were reissued to Mr. John at a discount of 2 per share. The amount received on the reissue of shares is as follows:
Number of forfeited shares: 300
Discount per share: 2
Amount received on reissue: 300 x (10 - 2) = 2400
Adjustment for calls in arrears:
The amount received on the reissue of shares is more than the amount due on the calls in arrears. Therefore, the excess amount received is treated as capital profit.
Amount due on calls in arrears: 1500
Amount received on reissue: 2400
Excess amount received: 2400 - 1500 = 900
Treatment of excess amount received:
The excess amount received on the reissue of shares is treated as capital profit. The capital profit is transferred to the capital reserve account.
Journal entry for reissue of forfeited shares:
Bank account Dr. 2400
Share forfeiture account Cr. 2000
Capital reserve account Cr. 400
Conclusion:
Thus, the forfeited shares of Mr. Bird were reissued to Mr. John at a discount of 2 per share. The excess amount received on the reissue of shares is treated as capital profit and transferred to the capital reserve account.
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ABC limited issued 20000 equity shares of 10 each payable as 2 on application, 3 on allotment , 4 on first call , 1 on final call . All the shares were subscribed . Money due on all shares was fully received except for Mr. Bird holding 300 shares who failed to pay first and final call money. All those 300 shares were forfeited . The forfeited shares of Mr. Bird were subsequent ly re-issue to Mr. John as fully paid up at a discount 2 per share?
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ABC limited issued 20000 equity shares of 10 each payable as 2 on application, 3 on allotment , 4 on first call , 1 on final call . All the shares were subscribed . Money due on all shares was fully received except for Mr. Bird holding 300 shares who failed to pay first and final call money. All those 300 shares were forfeited . The forfeited shares of Mr. Bird were subsequent ly re-issue to Mr. John as fully paid up at a discount 2 per share? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about ABC limited issued 20000 equity shares of 10 each payable as 2 on application, 3 on allotment , 4 on first call , 1 on final call . All the shares were subscribed . Money due on all shares was fully received except for Mr. Bird holding 300 shares who failed to pay first and final call money. All those 300 shares were forfeited . The forfeited shares of Mr. Bird were subsequent ly re-issue to Mr. John as fully paid up at a discount 2 per share? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for ABC limited issued 20000 equity shares of 10 each payable as 2 on application, 3 on allotment , 4 on first call , 1 on final call . All the shares were subscribed . Money due on all shares was fully received except for Mr. Bird holding 300 shares who failed to pay first and final call money. All those 300 shares were forfeited . The forfeited shares of Mr. Bird were subsequent ly re-issue to Mr. John as fully paid up at a discount 2 per share?.
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