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Ajay Ltd. decides to redeem 10,000 Preference Shares of Rs. 10 each at 10% premium. Balance in Profit and Loss A/c is Rs. 65,000 and in Securities Premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares of Rs. 10 each to be issued for the purpose of redemption, if the new share is to be issued at a discount of 20%.
  • a)
    13, 125 shares
  • b)
    5,625 shares 
  • c)
    13,750 shares 
  • d)
    5,000 shares
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Ajay Ltd. decides to redeem 10,000 Preference Shares of Rs. 10 each at...
Calculation of the amount required for redemption:

Total amount required for redemption = Number of preference shares to be redeemed x (par value + premium)

= 10,000 x (10 + 1) = Rs. 1,10,000

Calculation of the amount available for redemption:

Amount available for redemption = Balance in Profit and Loss A/c + Securities Premium A/c

= Rs. 65,000 + Rs. 5,000 = Rs. 70,000

Calculation of the shortfall amount:

Shortfall amount = Total amount required for redemption - Amount available for redemption

= Rs. 1,10,000 - Rs. 70,000 = Rs. 40,000

Calculation of the number of equity shares to be issued:

Face value of each equity share = Rs. 10

Discount offered = 20%

Amount received per share = Face value - (Face value x Discount)

= Rs. 10 - (Rs. 10 x 0.20) = Rs. 8

Number of equity shares to be issued = Shortfall amount / Amount received per share

= Rs. 40,000 / Rs. 8 = 5,000 shares

Therefore, the minimum number of equity shares of Rs. 10 each to be issued for the purpose of redemption is 5,000 shares.
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Ajay Ltd. decides to redeem 10,000 Preference Shares of Rs. 10 each at 10% premium. Balance in Profit and Loss A/c is Rs. 65,000 and in Securities Premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares of Rs. 10 each to be issued for the purpose of redemption, if the new share is to be issued at a discount of 20%.a)13, 125 sharesb)5,625 sharesc)13,750 sharesd)5,000 sharesCorrect answer is option 'D'. 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 Profit and Loss A/c is Rs. 65,000 and in Securities Premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares of Rs. 10 each to be issued for the purpose of redemption, if the new share is to be issued at a discount of 20%.a)13, 125 sharesb)5,625 sharesc)13,750 sharesd)5,000 sharesCorrect answer is option 'D'. 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 Profit and Loss A/c is Rs. 65,000 and in Securities Premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares of Rs. 10 each to be issued for the purpose of redemption, if the new share is to be issued at a discount of 20%.a)13, 125 sharesb)5,625 sharesc)13,750 sharesd)5,000 sharesCorrect answer is option 'D'. 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 Profit and Loss A/c is Rs. 65,000 and in Securities Premium A/c is Rs. 5,000. You are required to calculate the minimum number of equity shares of Rs. 10 each to be issued for the purpose of redemption, if the new share is to be issued at a discount of 20%.a)13, 125 sharesb)5,625 sharesc)13,750 sharesd)5,000 sharesCorrect answer is option 'D'. Can you explain this answer?.
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