Financial Accounting

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Worked Example – Forfeiture of shares

Torquay Ltd is listed on the Australian Securities Exchange. On 1 July 2019 the company allots 1 million shares for a price of $1.00 as partly paid to $0.50 per share. The call for the balance of the share price, $0.50, is made on the same date. By 1 December 2019, the holders of 900,000 shares have made the payment that is due on the call. The directors decide to forfeit the remaining 100,000 shares.

The shares are reissued on 14 December 2019 as fully paid. The company receives $0.70 per share when the shares are reissued. The costs of conducting the sale amount to $500. The surplus amounts are returned to the original shareholders after payment of all expenses associated with reissuing the shares.