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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 are worth Rs. 3,00,000.

Premium on Redemption

- The premium on redemption is 10%.
- Therefore, the total amount required for redemption of preference shares will be:
= Rs. 3,00,000 + (10% of Rs. 3,00,000)
= Rs. 3,30,000

General Reserve

- The company has a general reserve of Rs. 1,50,000.

Security Premium Balance

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

Fresh Issue of Shares at 10% Discount

- The company plans to make a fresh issue of shares at a 10% discount.

Calculation

- The face value of the fresh issued shares can be calculated as follows:
= (Redemption amount + General reserve + Security premium balance) / (1 - Discount rate)
= (Rs. 3,30,000 + Rs. 1,50,000 + Rs. 35,000) / (1 - 10%)
= Rs. 5,15,000 / 0.9
= Rs. 5,72,222

- However, the discount of 10% is to be given on the face value of the shares.
- Therefore, the face value of the shares will be:
= Rs. 5,72,222 / (1 - 10%)
= Rs. 6,35,802

- Since the company plans to issue the shares at a 10% discount, the face value will be reduced by 10%.
- Therefore, the face value of the fresh issued shares will be:
= Rs. 6,35,802 - (10% of Rs. 6,35,802)
= Rs. 6,35,802 - Rs. 63,580.20
= Rs. 5,72,221.80
= Rs. 1,66,667 (approx.)

Hence, the correct answer is option 'A' (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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