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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:
- a)Rs. 20,000
- b)Rs. 28,000
- c)Rs. 1,00,000
- d)Rs. 80,000
Correct answer is option 'B'. Can you explain this answer?
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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for w...
Calculation of Amount Transferred to Capital Redemption Reserve
Redemption of Preference Shares:
- Redeemable preference shares of Rs. 1,00,000 are redeemed at par.
- Therefore, the company pays the preference shareholders Rs. 1,00,000 in cash.
Issue of Equity Shares:
- Fresh equity shares of Rs. 80,000 are issued.
- The issue price of the equity shares is at a discount of 10%.
- Therefore, the issue price of each equity share is Rs. 72,000 (80,000 - 10% of 80,000).
- The number of equity shares issued is calculated as follows:
Number of equity shares = Amount raised by equity shares / Issue price per share
Number of equity shares = 80,000 / 72,000
Number of equity shares = 1.111 (rounded off to 1)
Transfer to Capital Redemption Reserve:
- As per Section 55 of the Companies Act, 2013, when a company redeems its preference shares, it must transfer a sum equal to the nominal value of the shares redeemed from its profits to a special reserve called the Capital Redemption Reserve.
- The amount transferred to the Capital Redemption Reserve is calculated as follows:
Amount transferred to Capital Redemption Reserve = Nominal value of preference shares redeemed - Amount raised by issue of equity shares
Amount transferred to Capital Redemption Reserve = 1,00,000 - 80,000
Amount transferred to Capital Redemption Reserve = 20,000
Therefore, the amount transferred to the Capital Redemption Reserve is Rs. 20,000. The correct answer is option (b).
Redemption of Preference Shares:
- Redeemable preference shares of Rs. 1,00,000 are redeemed at par.
- Therefore, the company pays the preference shareholders Rs. 1,00,000 in cash.
Issue of Equity Shares:
- Fresh equity shares of Rs. 80,000 are issued.
- The issue price of the equity shares is at a discount of 10%.
- Therefore, the issue price of each equity share is Rs. 72,000 (80,000 - 10% of 80,000).
- The number of equity shares issued is calculated as follows:
Number of equity shares = Amount raised by equity shares / Issue price per share
Number of equity shares = 80,000 / 72,000
Number of equity shares = 1.111 (rounded off to 1)
Transfer to Capital Redemption Reserve:
- As per Section 55 of the Companies Act, 2013, when a company redeems its preference shares, it must transfer a sum equal to the nominal value of the shares redeemed from its profits to a special reserve called the Capital Redemption Reserve.
- The amount transferred to the Capital Redemption Reserve is calculated as follows:
Amount transferred to Capital Redemption Reserve = Nominal value of preference shares redeemed - Amount raised by issue of equity shares
Amount transferred to Capital Redemption Reserve = 1,00,000 - 80,000
Amount transferred to Capital Redemption Reserve = 20,000
Therefore, the amount transferred to the Capital Redemption Reserve is Rs. 20,000. The correct answer is option (b).
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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for w...
80000 issued at discount @10% =80000-10%=72000
CRR = Face value of prefence share - new share capital
=100000-72000=28000
CRR = Face value of prefence share - new share capital
=100000-72000=28000
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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct answer is option 'B'. Can you explain this answer?
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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct answer is option 'B'. 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 Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct answer is option 'B'. 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 Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct answer is option 'B'. Can you explain this answer?.
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