CIE Accounting Paper-2: Specimen Questions 42 - 44 of 103

Passage

Turbo & Co. forfeited 100 equity shares of £100 each held by Mr. Andy on 20th December 2011, for nonpayment of first call of £20 per share and final call of £30 per share. These shares were reissued to Mr. Candy on 31st December 2011, at a discount of £35 per share.

Question number: 42 (2 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What does Turbo & Co. do with the excess of amount in the share forfeiture account?

Explanation

The amount in excess remaining in the share forfeiture account will be transferred to an account called as Capital Reserve account by Turbo & Co. The amount present in this account cannot be used by the company to distribute dividends to its share holders.

Question number: 43 (3 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

How are Mr. Andy and Mr. Candy affected by the forfeiture and reissue of shares?

Explanation

Mr. Andy losses the ownership towards the shares of the company and ceases to be the member of the company. He also losses all the rights and interests vested with him, due to the forfeiture of the shares owned by him. On the other hand, Mr. Candy becomes the new owner of the shares and gains all the rights and interest in the company. He becomes a member of the company and is liable to pay the amount called on him duly.

Question number: 44 (4 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What does Turbo & Co. mean by forfeiture of shares?

Explanation

The term forfeiture of shares means the cancellation of shares which have been issued to Mr. Andy, due to nonpayment of the first and final call money. The amount which has already been received on these shares will be seized or forfeited by Turbo & Co. These shares can later be reissued by the company.

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