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Following are details of ABC Ltd.:
Outstanding Redeemable preference shares =Rs. 3,00,000
Premium on redemption = 10%
General Reserve = Rs. 1,50,000
Security Premium Balance = Rs. 35,000
Fresh issue of shares to be made at 10% discount
The face value of fresh issued shares will be: 
  • a)
     Rs. 1,66,667
  • b)
     Rs. 1,50,000 
  • c)
    Rs. 1,85,000
  • d)
    Rs. 1,80,000
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Following are details of ABC Ltd.:Outstanding Redeemable preference sh...
Calculation of Face Value of Fresh Issued Shares

Outstanding Redeemable Preference Shares

- The outstanding redeemable preference shares amount to Rs. 3,00,000.

Premium on Redemption

- The premium on redemption is 10%.
- Therefore, the total amount of premium on redemption is Rs. 30,000 (10% of Rs. 3,00,000).

General Reserve

- The general reserve is Rs. 1,50,000.

Security Premium Balance

- The security premium balance is Rs. 35,000.

Fresh Issue of Shares

- The fresh issue of shares will be made at a 10% discount.
- This means that the issue price will be 90% of the face value.

Calculation of Face Value

- Let the face value of the fresh issued shares be 'x'.
- The total amount of funds raised from the fresh issue can be calculated as follows:

Total funds raised = Face value of fresh issued shares * Number of shares issued

- The total funds raised can also be calculated as follows:

Total funds raised = (Issued price per share * Number of shares issued) - Discount

- We know that the issued price per share is 90% of the face value, i.e., 0.9x.
- Therefore, the total funds raised can be expressed as follows:

Total funds raised = (0.9x * Number of shares issued) - (0.1x * Number of shares issued)

Total funds raised = 0.8x * Number of shares issued

- Equating the two expressions for total funds raised, we get:

0.8x * Number of shares issued = Face value of fresh issued shares * Number of shares issued

- Simplifying, we get:

0.8x = Face value of fresh issued shares

- We can now substitute the values of the outstanding redeemable preference shares, premium on redemption, general reserve, and security premium balance to get the value of 'x'.

Face value of fresh issued shares = Total funds raised / Number of shares issued

Total funds raised = Rs. 3,00,000 + Rs. 30,000 + Rs. 1,50,000 + Rs. 35,000

Total funds raised = Rs. 5,15,000

- Let the number of shares issued be 'n'.
- We know that the issued price per share is 90% of the face value, i.e., 0.9x.
- Therefore, the total funds raised can be expressed as follows:

Total funds raised = (0.9x * n) - (0.1x * n)

Total funds raised = 0.8x * n

- Equating the two expressions for total funds raised, we get:

0.8x * n = Rs. 5,15,000

- Simplifying, we get:

x = Rs. 1,66,667

Therefore, the face value of the fresh issued shares is Rs. 1,66,667.
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Following are details of ABC Ltd.:Outstanding Redeemable preference shares =Rs. 3,00,000Premium on redemption = 10%General Reserve = Rs. 1,50,000Security Premium Balance = Rs. 35,000Fresh issue of shares to be made at 10% discountThe face value of fresh issued shares will be:a)Rs. 1,66,667b)Rs. 1,50,000c)Rs. 1,85,000d)Rs. 1,80,000Correct answer is option 'A'. Can you explain this answer?
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Following are details of ABC Ltd.:Outstanding Redeemable preference shares =Rs. 3,00,000Premium on redemption = 10%General Reserve = Rs. 1,50,000Security Premium Balance = Rs. 35,000Fresh issue of shares to be made at 10% discountThe face value of fresh issued shares will be:a)Rs. 1,66,667b)Rs. 1,50,000c)Rs. 1,85,000d)Rs. 1,80,000Correct answer is option 'A'. 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 Following are details of ABC Ltd.:Outstanding Redeemable preference shares =Rs. 3,00,000Premium on redemption = 10%General Reserve = Rs. 1,50,000Security Premium Balance = Rs. 35,000Fresh issue of shares to be made at 10% discountThe face value of fresh issued shares will be:a)Rs. 1,66,667b)Rs. 1,50,000c)Rs. 1,85,000d)Rs. 1,80,000Correct answer is option 'A'. 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 Following are details of ABC Ltd.:Outstanding Redeemable preference shares =Rs. 3,00,000Premium on redemption = 10%General Reserve = Rs. 1,50,000Security Premium Balance = Rs. 35,000Fresh issue of shares to be made at 10% discountThe face value of fresh issued shares will be:a)Rs. 1,66,667b)Rs. 1,50,000c)Rs. 1,85,000d)Rs. 1,80,000Correct answer is option 'A'. Can you explain this answer?.
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