Question

XYZ Ltd. forfeited 500 shares of ₹10 each issued at par for non-payment of final call ₹2 per share. How much amount was forfeited?

• A. ₹1,000
• B. ₹4,000
• C. ₹5,000
• D. ₹2,500

Hint:

The Share Forfeiture Account always records the amount already received from the defaulting shareholders. Do not confuse it with the total face value or the unpaid amount.

Answer 1

The Correct Option is B

Step 1: Understanding the Question:
Forfeiture means cancelling the shares due to non-payment. The "forfeited amount" refers to the money already paid by the shareholder to the company, which the company retains.

Step 2: Key Formula or Approach:
\[ \text{Amount Forfeited} = \text{Number of Shares Forfeited} \times \text{Amount Paid per Share} \]

Step 3: Detailed Explanation:
1. Number of shares forfeited = 500.
2. Face value per share = ₹10.
3. Unpaid amount (final call) = ₹2.
4. Therefore, the amount already paid by the shareholder = \( 10 - 2 = \text{₹}8 \) per share.
5. Total amount forfeited = \( 500 \times 8 = \text{₹}4,000 \).

Step 4: Final Answer:
The amount forfeited by the company is ₹4,000.