Step 1: Understanding the Concept:
When shares are forfeited, the money already paid by the shareholder is kept by the company in a "Share Forfeiture Account."
This is a gain for the company.
When these shares are reissued at a discount, the loss (discount) is covered using the balance in the Share Forfeiture Account.
The remaining surplus specifically belonging to the reissued shares represents a permanent capital profit.
This profit must be transferred to the "Capital Reserve Account."
Money belonging to forfeited shares that have NOT yet been reissued stays in the Forfeiture account.
Key Formula or Approach:
\[ \text{Transfer to Capital Reserve} = (\text{Forfeited Amount per share} - \text{Loss on Reissue per share}) \times \text{Number of Shares Reissued} \]
Step 2: Detailed Explanation:
1. Analyze Forfeiture Details:
Total Forfeited Shares = 200
Face Value = \$10
Amount Paid (and thus forfeited) per share = \$6
This \$6 per share is the "credit" available to cover future reissue discounts.
2. Analyze Reissue Details:
Number of shares reissued = 150
Reissue price = \$8 per share
Since they are reissued as "fully paid up," the value being given is the full \$10 face value.
Discount (Loss) on reissue = $\$10 - \$8 = \$2$ per share.
3. Calculate Capital Profit per share:
Each reissued share had a \$6 gain during forfeiture and a \$2 loss during reissue.
Net Gain per share = $\$6 - \$2 = \$4$.
4. Calculate Total Transfer:
We only transfer profit for the 150 shares that have been "completed" (reissued).
\[ \text{Total Transfer} = 150 \text{ shares} \times \$4 = \$600 \]
Step 3: Final Answer:
The company will transfer \$600 to the Capital Reserve Account.
The remaining balance in the Share Forfeiture account for the other 50 shares ($50 \times \$6 = \$300$) will stay in the forfeiture account until those shares are reissued.