Question 30 of 61beginner💡 UnderstandVery Short1 mark

If a Share of Rs. 10 on which Rs. 6 has been paid is forfeited, at what minimum price it can be reissued.

Correct Answer

Rs. 4 per share

Exercise: Test Your Understanding – III | Q: 2 | (Chapter: 58)
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Explanation

According to the textbook context, when shares are forfeited and reissued, the amount of discount allowed on reissue cannot exceed the amount that had been received on forfeited shares at the time of initial issue. In this case, a share of Rs. 10 on which Rs. 6 has been paid means Rs. 6 was received by the company. Therefore, the maximum discount that can be allowed on reissue is Rs. 6. Since the face value is Rs. 10, the minimum price at which the share can be reissued is Rs. 10 - Rs. 6 = Rs. 4.

Solution Steps

  1. Step 1: Identify the face value of the share = Rs. 10

  2. Step 2: Identify the amount received on the forfeited share = Rs. 6

  3. Step 3: Maximum discount allowed on reissue = Amount received = Rs. 6

  4. Step 4: Minimum reissue price = Face Value - Maximum Discount = Rs. 10 - Rs. 6 = Rs. 4

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