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X Ltd. had 5,000 12% Redeemable Preference Shares of Rs. 100 each. The company decided to redeem them by issuing equity shares of Rs. 100 each @ a premium of 255. The member of equity shares to be issued are:
  • a)
    4000 shares
  • b)
    5000 shares 
  • c)
    4480 shares 
  • d)
    5600 shares
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
X Ltd. had 5,000 12% Redeemable Preference Shares of Rs. 100 each. The...
Solution:

Given,
Number of Redeemable Preference Shares = 5,000
Face Value of Redeemable Preference Shares = Rs. 100
Rate of dividend on Redeemable Preference Shares = 12%

Step 1: Calculation of Total Amount to be paid for Redemption of Preference Shares
Total Amount to be paid for Redemption of Preference Shares = Number of Redeemable Preference Shares x Face Value
= 5,000 x Rs. 100
= Rs. 5,00,000

Step 2: Calculation of Premium on Equity Shares
Premium on Equity Shares = 255% of Face Value of Equity Shares
= 255% of Rs. 100
= Rs. 255

Step 3: Calculation of Number of Equity Shares to be issued
Number of Equity Shares to be issued = Total Amount to be paid for Redemption of Preference Shares / (Face Value of Equity Shares + Premium on Equity Shares)
= Rs. 5,00,000 / (Rs. 100 + Rs. 255)
= Rs. 5,00,000 / Rs. 355
= 1,408.45

Since the number of Equity Shares cannot be in decimal, the company will issue 5,000 Equity Shares of Rs. 100 each @ a premium of 255.

Therefore, the correct answer is option 'B' i.e 5000 shares.
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X Ltd. had 5,000 12% Redeemable Preference Shares of Rs. 100 each. The company decided to redeem them by issuing equity shares of Rs. 100 each @ a premium of 255. The member of equity shares to be issued are:a)4000 sharesb)5000 sharesc)4480 sharesd)5600 sharesCorrect answer is option 'B'. Can you explain this answer?
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X Ltd. had 5,000 12% Redeemable Preference Shares of Rs. 100 each. The company decided to redeem them by issuing equity shares of Rs. 100 each @ a premium of 255. The member of equity shares to be issued are:a)4000 sharesb)5000 sharesc)4480 sharesd)5600 sharesCorrect answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about X Ltd. had 5,000 12% Redeemable Preference Shares of Rs. 100 each. The company decided to redeem them by issuing equity shares of Rs. 100 each @ a premium of 255. The member of equity shares to be issued are:a)4000 sharesb)5000 sharesc)4480 sharesd)5600 sharesCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for X Ltd. had 5,000 12% Redeemable Preference Shares of Rs. 100 each. The company decided to redeem them by issuing equity shares of Rs. 100 each @ a premium of 255. The member of equity shares to be issued are:a)4000 sharesb)5000 sharesc)4480 sharesd)5600 sharesCorrect answer is option 'B'. Can you explain this answer?.
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