A company's capital consists of 100 000 ordinary shares issued at $2 and paid to $1 per share. On 1 September, a first call of 50c was made on the ordinary shares. By 30 September, the call money received amounted to $45 000. No further payments were received, and on 31 October, the shares on which calls were outstanding were forfeited. On 15 November, the forfeited shares were reissued as paid to $1.50 for a payment of $1 per share. The appropriate cash amount from the reissue was received on 19 November. Costs of reissue amounted to $1 800. The company's constitution provided for any surplus on resale, after satisfaction of unpaid calls, accrued interest and costs, to be returned to the shareholders whose shares were forfeited.
The entry to record the reissue of forfeited shares is:

Question

Quizplus · Accepted Answer

The correct entry involves debiting Cash for the amount received from the reissue ($10,000), debiting Forfeited shares for the amount that covers the unpaid call and costs ($5,000), and crediting Share capital - ordinary for the total amount credited to share capital upon reissue ($15,000). This reflects the cash inflow from the reissue, the utilization of forfeited shares to cover unpaid amounts and costs, and the increase in share capital due to the reissue.

A Company's Capital Consists of 100 000 Ordinary Shares Issued