On reissue, the debit to Shares Forfeiture A/c is only the “discount on reissue” (because the forfeiture balance is used to cover that discount).
Face value per share = Rs. 10.
Reissue price (fully paid) = Rs. 8.
So discount on reissue = Rs. (10−8=2) per share.
For 500 shares: (500×2=Rs. 1,000)
So, Shares Forfeiture A/c will be debited by Rs. 1,000 (Option 1).
Note: The forfeiture amount on these shares is more than Rs. 1,000, since the shareholder had already paid application + allotment.