CSEET · Fundamentals of Accounting · Introduction to Company Accounts
Kaveri Ltd. forfeited 200 equity shares of Rs 10 each, fully called, on which Rs 6 per share was paid. Of these, 120 shares were re-issued at Rs 7 per share as fully paid. What amount is transferred to Capital Reserve on this re-issue?
The capital reserve is Rs 360. The forfeited amount on 120 shares is Rs 720, and the discount allowed on re-issue at Rs 7 is Rs 360. The balance of Rs 360 is the gain, transferred to Capital Reserve.
- ARs 480Correct
- BRs 720
- CRs 240
- DRs 360
Explanation
Forfeited amount per share = Rs 6. For 120 shares = Rs 720. Re-issue discount = (10 - 7) x 120 = Rs 360. Gain = 720 - 360 = Rs 360? Check: the re-issue is at Rs 7 for a share carrying Rs 6 forfeited, so the shortfall allowed is Rs 3 per share, and the gain is Rs 6 - Rs 3 = Rs 3 per share, giving Rs 360. Hence the correct figure is Rs 360, not Rs 480.
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