GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Actual amount received on forfeited shares
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Original discount on reissued shares, if any
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Total amount of (a) and (b)
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10 % of face value of shares
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Detailed explanation-1: -Generally, these shares are reissued at a discount i.e. at a price that is less than their nominal value. The amount of discount allowed at the time of reissue in no case should be more than the amount forfeited on such shares. Hence, the correct option is B.
Detailed explanation-2: -When forfeited shares are originally issued at discount are reissued then discount allowed at the time of original issue is again applicable. On reissue of shares, the discount on issue of shares account is debited by the original discount amount.
Detailed explanation-3: -The maximum amount of discount on reissue of forfeited shares is that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares on their original issue and that the discount allowed on re issue of forfeited shares should be debited to the share forfeited account.
Detailed explanation-4: -Reissue of forfeited shares at a discount : When the shares forfeited arereissued at discount, Bank account is debited by the amount received and Share capital account is credited by the paid up amount. The amount of discount allowedis debited to Share Forfeited Account.
Detailed explanation-5: -The loss or the discount in the value of re-issue cannot exceed the balance in the share forfeiture account.