Zenith Ventures Plc forfeited 800 ordinary shares of ₦1.00 nominal value each, called up t… — JAMB UTME

Zenith Ventures Plc forfeited $800$ ordinary shares of $₦1.00$ nominal value each, called up to $₦0.80$ per share, due to non-payment of the first call of $₦0.30$ per share. Prior to forfeiture, the shareholder had paid $₦0.50$ per share. All $800$ forfeited shares were subsequently re-issued to a new investor as fully paid up for $��0.60$ per share. What is the net amount, in Naira ( $₦$ ), to be credited to the Capital Reserve Account?

Answer: 80 ₦

Answer

The net amount to be credited to the Capital Reserve Account is

₦80

The profit resulting from share forfeiture and re-issue is the excess of the amount forfeited (

₦400

) over the discount granted on re-issue (

₦320

). The resulting capital profit of

₦80

is transferred to Capital Reserve.

Step-by-Step Solution

Determine total amount forfeited from defaulting shareholder

800 \text{ shares} \times ₦0.50 = ₦400

The Forfeited Shares account is credited with the actual amount paid by the shareholder prior to default.

Determine the discount allowed on re-issue of shares

(₦1.00 - ₦0.60) \times 800 = ₦0.40 \times 800 = ₦320

When shares are re-issued as fully paid for

₦0.60

, the

₦0.40

deficit per share is absorbed by the Forfeited Shares Account.

Calculate the surplus balance transferred to Capital Reserve Account

₦400 - ₦320 = ₦80

Any remaining balance in the Forfeited Shares Account after re-issue represents a capital gain and must be transferred to Capital Reserve.

Key Concept

Profit on re-issue of forfeited shares transferred to Capital Reserve

Estimated Time:1m 30s

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