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Ajay Ltd decides to redeem 10,000 preference shares of Rs. 10/- each at 10% premium. Balance in P & L A/c is Rs. 65,000 and securities premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares at the rate of Rs. 10/- each at 20% discount
  • a)
    3125
  • b)
    5625
  • c)
    5000
  • d)
    None
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Ajay Ltd decides to redeem 10,000 preference shares of Rs. 10/- each a...
Calculation:

Step 1: Calculate the total amount required for redemption of preference shares
Total amount required = Face value + Premium
= Rs. 10 + 10% of Rs. 10 = Rs. 10 + Rs. 1 = Rs. 11
Total amount required to redeem 10,000 preference shares = Rs. 11 x 10,000 = Rs. 1,10,000

Step 2: Determine the amount available for redemption
Total amount available = Balance in P&L A/c + Securities Premium A/c
= Rs. 65,000 + Rs. 5,000 = Rs. 70,000

Step 3: Calculate the shortfall amount
Shortfall amount = Total amount required - Total amount available
= Rs. 1,10,000 - Rs. 70,000 = Rs. 40,000

Step 4: Calculate the minimum number of equity shares to be issued at a discount
Face value of each equity share = Rs. 10
Discount rate = 20%
Amount received per equity share = Face value - Discount
= Rs. 10 - 20% of Rs. 10 = Rs. 10 - Rs. 2 = Rs. 8
Minimum number of equity shares required = Shortfall amount / Amount received per equity share
= Rs. 40,000 / Rs. 8 = 5000
Therefore, the minimum number of equity shares to be issued at a discount to redeem the preference shares is 5000. Hence, the correct answer is option 'C'.
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Community Answer
Ajay Ltd decides to redeem 10,000 preference shares of Rs. 10/- each a...
10,000-65,000 = 5000
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Ajay Ltd decides to redeem 10,000 preference shares of Rs. 10/- each at 10% premium. Balance in P & L A/c is Rs. 65,000 and securities premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares at the rate of Rs. 10/- each at 20% discounta)3125b)5625c)5000d)NoneCorrect answer is option 'C'. Can you explain this answer?
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Ajay Ltd decides to redeem 10,000 preference shares of Rs. 10/- each at 10% premium. Balance in P & L A/c is Rs. 65,000 and securities premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares at the rate of Rs. 10/- each at 20% discounta)3125b)5625c)5000d)NoneCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Ajay Ltd decides to redeem 10,000 preference shares of Rs. 10/- each at 10% premium. Balance in P & L A/c is Rs. 65,000 and securities premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares at the rate of Rs. 10/- each at 20% discounta)3125b)5625c)5000d)NoneCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Ajay Ltd decides to redeem 10,000 preference shares of Rs. 10/- each at 10% premium. Balance in P & L A/c is Rs. 65,000 and securities premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares at the rate of Rs. 10/- each at 20% discounta)3125b)5625c)5000d)NoneCorrect answer is option 'C'. Can you explain this answer?.
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