Asked by Michelle Rebollar on Jul 02, 2024
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A company's capital consists of 100 000 ordinary shares issued at $2 and paid to $1 per share. On 1 September, a first call of 50c was made on the ordinary shares. By 30 September, the call money received amounted to $45 000. No further payments were received, and on 31 October, the shares on which calls were outstanding were forfeited. On 15 November, the forfeited shares were reissued as paid to $1.50 for a payment of $1 per share. The appropriate cash amount from the reissue was received on 19 November. Costs of reissue amounted to $1 800. The company's constitution provided for any surplus on resale, after satisfaction of unpaid calls, accrued interest and costs, to be returned to the shareholders whose shares were forfeited.
The entry to record the reissue of forfeited shares is:
A) Cash Dr10000 Forfeited shares Dr5000 Share capital - ordinary Cr15000\begin{array} { l l l l } \text { Cash } & \mathrm { Dr } & 10000 & \\\text { Forfeited shares } & \mathrm { Dr } & 5000 & \\\text { Share capital - ordinary } & \mathrm { Cr } & & 15000\end{array} Cash Forfeited shares Share capital - ordinary DrDrCr10000500015000
B) Cash Dr5000 Forfeited shares Dr5000 Share capital - ordinary Cr10000\begin{array} { l l l l } \text { Cash } & \mathrm { Dr } & 5000 & \\\text { Forfeited shares } & \mathrm { Dr } & 5000 & \\\text { Share capital - ordinary } & \mathrm { Cr } & & 10000\end{array} Cash Forfeited shares Share capital - ordinary DrDrCr5000500010000
C) Cash Dr 10000 Share capital - ordinary Cr10000\begin{array} { l l l l } \text { Cash } & \text { Dr } & 10000 \\\text { Share capital - ordinary } & \mathrm { Cr } & & 10000\end{array} Cash Share capital - ordinary Dr Cr1000010000
D) Share capital Dr15000 Forfeited shares Cr15000\begin{array} { l l l } \text { Share capital } & \mathrm { Dr } & 15000 \\\text { Forfeited shares } & \mathrm { Cr } & &15000\end{array} Share capital Forfeited shares DrCr1500015000
Forfeited Shares
Shares that are surrendered or taken back by a company from an investor because of the non-fulfillment of purchase conditions or agreements.
Reissue
The process of issuing again, such as reissuing shares or securities that have been bought back or cancelled.
Share Capital
The money that a company raises through the issue of shares, representing the capital invested by shareholders.
- Understand the principle of forfeited shares, including the accounting processes and consequences for their reissue.
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Learning Objectives
- Understand the principle of forfeited shares, including the accounting processes and consequences for their reissue.
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