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Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?
- a)Rs. 1,05,000
- b)Rs. 1,00,000
- c)Rs. 2,00,000
- d)Rs. 1,11,000
Correct answer is option 'B'. Can you explain this answer?
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Preference shares amounting to Rs. 2,00,000 are redeemed at a premium ...
To determine the amount to be transferred to the capital redemption reserve, we need to understand the concept of capital redemption reserve and the calculation involved in redeeming preference shares at a premium.
Capital Redemption Reserve:
Capital redemption reserve is a reserve created out of the profits of a company for the purpose of redeeming preference shares or debentures. It is a part of the company's share capital and is used to protect the interest of the shareholders.
Redemption of Preference Shares at a Premium:
When preference shares are redeemed at a premium, it means that the company pays an amount higher than the face value of the shares to the shareholders. This premium is usually generated by issuing new shares at a premium.
Calculation:
In this case, preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%. This means that the shareholders will receive an amount higher than the face value of their shares. The premium amount can be calculated as follows:
Premium = Face Value of Shares * Premium Rate/100
Premium = Rs. 2,00,000 * 5/100
Premium = Rs. 10,000
To redeem these preference shares, the company issues new shares amounting to Rs. 1,00,000 at a premium of 10%. The premium amount for these new shares can be calculated as follows:
Premium = Face Value of Shares * Premium Rate/100
Premium = Rs. 1,00,000 * 10/100
Premium = Rs. 10,000
Transfer to Capital Redemption Reserve:
The amount to be transferred to the capital redemption reserve is equal to the premium received on the issue of new shares. In this case, the premium received on the new shares is Rs. 10,000. Therefore, the amount to be transferred to the capital redemption reserve is Rs. 10,000.
Hence, the correct answer is option 'B' - Rs. 1,00,000.
Capital Redemption Reserve:
Capital redemption reserve is a reserve created out of the profits of a company for the purpose of redeeming preference shares or debentures. It is a part of the company's share capital and is used to protect the interest of the shareholders.
Redemption of Preference Shares at a Premium:
When preference shares are redeemed at a premium, it means that the company pays an amount higher than the face value of the shares to the shareholders. This premium is usually generated by issuing new shares at a premium.
Calculation:
In this case, preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%. This means that the shareholders will receive an amount higher than the face value of their shares. The premium amount can be calculated as follows:
Premium = Face Value of Shares * Premium Rate/100
Premium = Rs. 2,00,000 * 5/100
Premium = Rs. 10,000
To redeem these preference shares, the company issues new shares amounting to Rs. 1,00,000 at a premium of 10%. The premium amount for these new shares can be calculated as follows:
Premium = Face Value of Shares * Premium Rate/100
Premium = Rs. 1,00,000 * 10/100
Premium = Rs. 10,000
Transfer to Capital Redemption Reserve:
The amount to be transferred to the capital redemption reserve is equal to the premium received on the issue of new shares. In this case, the premium received on the new shares is Rs. 10,000. Therefore, the amount to be transferred to the capital redemption reserve is Rs. 10,000.
Hence, the correct answer is option 'B' - Rs. 1,00,000.
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Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?a)Rs. 1,05,000b)Rs. 1,00,000c)Rs. 2,00,000d)Rs. 1,11,000Correct answer is option 'B'. Can you explain this answer?
Question Description
Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?a)Rs. 1,05,000b)Rs. 1,00,000c)Rs. 2,00,000d)Rs. 1,11,000Correct 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 Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?a)Rs. 1,05,000b)Rs. 1,00,000c)Rs. 2,00,000d)Rs. 1,11,000Correct 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 Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?a)Rs. 1,05,000b)Rs. 1,00,000c)Rs. 2,00,000d)Rs. 1,11,000Correct answer is option 'B'. Can you explain this answer?.
Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?a)Rs. 1,05,000b)Rs. 1,00,000c)Rs. 2,00,000d)Rs. 1,11,000Correct 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 Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?a)Rs. 1,05,000b)Rs. 1,00,000c)Rs. 2,00,000d)Rs. 1,11,000Correct 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 Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5%, by issue of shares amounting to Rs. 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =?a)Rs. 1,05,000b)Rs. 1,00,000c)Rs. 2,00,000d)Rs. 1,11,000Correct answer is option 'B'. Can you explain this answer?.
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