Question

Ajay Ltd. forfeited 100 shares of Rs 10 each for non-payment of first call of Rs 1 per share and second and final call of Rs 3 per share. The minimum price per share at which these shares can be reissued will be:

• A. Rs 6
• B. Rs 4
• C. Rs 10
• D. Rs 16

Hint:

The minimum reissue price for a forfeited share (reissued as fully paid) is the face value minus the amount forfeited per share. It's also equal to the amount that was unpaid on that share at the time of forfeiture.

Answer 1

The Correct Option is B

To establish the lowest possible reissue price for shares that have been forfeited, the following procedure is adopted:

1. Ascertaining the Called-Up Capital:
Nominal value per share: Rs 10
Initial call unpaid: Rs 1
Subsequent and final call unpaid: Rs 3
Aggregate unpaid amount: Rs 1 + Rs 3 = Rs 4
Called-up capital per share = Nominal Value - Uncalled portion = Rs 10 - Rs 0 = Rs 10
Amount paid = Called-up Capital - Unpaid Amount = Rs 10 - Rs 4 = Rs 6

2. Understanding Forfeiture and Reissue Mechanisms:
Upon forfeiture of shares, the company effectively terminates the ownership rights associated with those shares and gains the authority to reissue them.
The company is permitted to reissue forfeited shares at a discount; however, this discount must not surpass the sum of payments initially received for these shares. This restriction is in place to prevent any inequitable advantage to the original shareholder.

3. Determining the Maximum Allowable Discount:
The maximum permissible discount per share is equivalent to the amount that was successfully collected on the forfeited shares, which is Rs 6.

4. Calculating the Minimum Reissue Price:
The minimum price at which a forfeited share can be reissued is calculated as: Called-up value - Maximum Discount = Rs 10 - Rs 6 = Rs 4.

Conclusion:
Consequently, the absolute lowest price per share at which these forfeited shares can be reissued stands at Rs 4.