Question

Assertion (A): Forfeited shares may be reissued by the company at a discount also.

Reason (R): Amount of discount on reissue of forfeited shares cannot exceed the amount forfeited on reissued shares.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are correct and (R) is the correct reason of (A).

• Both (A) and (R) are correct but (R) is not the correct reason of (A).

• Only (R) is correct.

• Both (A) and (R) are wrong.

Answer 1

Both (A) and (R) are correct and (R) is the correct reason of (A).

Explanation:

Assertion (A) is true, Forfeited shares can be reissued at a discount, since the company already received part of the original amount.

Reason (R) is also true, The maximum discount allowed on reissue is limited to the amount forfeited on those shares.