A company forfeited 10 000 shares that had been paid to $2 but on which a $1 call was outstanding. The company's constitution provided for any surplus on reissue to be returned to the forfeiting shareholders. The forfeited shares were reissued as paid to $4.00 for a payment of $3.50 per share. Costs of reissue amounted to $2000. The amount of the surplus repaid to the shareholders whose shares were forfeited is:
A) $15 000.
B) $13 000.
C) $10 000.
D) $38 000.

Question

Quizplus · Accepted Answer

The surplus repaid to the shareholders is calculated as follows: The shares were initially paid up to $2 but were forfeited with $1 still outstanding, so the company had $2 per share before forfeiture. Upon reissue, the shares were sold for $3.50 each but were considered as paid up to $4, meaning the company received an additional $1.50 per share on reissue. For 10,000 shares, this amounts to $15,000. After deducting the reissue costs of $2,000, the surplus is $13,000.

A Company Forfeited 10 000 Shares That Had Been Paid