On 1 July 2021 the directors of XYZ decided to forfeit the 12,000 shares in respect of which the call of $2.50 was not made. The shares were cancelled and reissued as fully paid to $5 per share on payment of $4 per share. Costs of $800 were incurred to reissue the shares.

What journal entry needs to be recorded for cancellation of forfeited shares?

a.

Cash (Dr)Forfeited shares liabilities (Cr) Share capital (Cr)

b.

Forfeited shares liability (Dr) Cash (Cr)

c.

None of the answers given

d.

Cash (Dr)Forfeited shares liability (Dr) Share capital (Cr)