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Question
Assertion: A company can reissue a forfeited share at an amount which is less than the amount not received on it.
Reason: A company can write off the net loss made on the reissue of a forfeited share from its capital reserve.
Which one of the following is correct?
Options
Both Assertion and Reason are true and Reason is the correct explanation for Assertion.
Both Assertion and Reason are true but Reason is not the correct explanation for Assertion.
Assertion is false and Reason is true.
Both Assertion and Reason are false.
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Solution
Both Assertion and Reason are false.
Explanation:
Assertion: False – A forfeited share can be reissued at a discount, but the discount cannot exceed the amount already forfeited. It is not linked to the amount not received.
Reason: False – Any loss on reissue is adjusted against the Forfeited Shares Account, not against Capital Reserve. Only the surplus (gain) left in Forfeited Shares Account after reissue is transferred to Capital Reserve.
