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S Ltd. issued 2,000, 10% Preference shares of Rs. 100 each at par, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 Equity Shares of Rs. 100 each at a premium of 20% per share. At the time of redemption of Preference shares, the amount to be transferred by the company to the Capital Redemption Reserve Account =?
  • a)
    Rs. 50,000
  • b)
    Rs. 40,000
  • c)
    Rs. 2,00,000
  • d)
    Rs. 2,20,000
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
S Ltd. issued 2,000, 10% Preference shares of Rs. 100 each at par, whi...
Redemption of Preference Shares
To calculate the amount to be transferred to the Capital Redemption Reserve (CRR) account, we need to consider the terms of the preference shares and the equity shares issued for the purpose of redemption.

Preference Shares
- Number of preference shares issued: 2,000
- Face value of preference shares: Rs. 100 each
- Premium on redemption: 10%

The total amount received from the issue of preference shares can be calculated as follows:
Total amount received = Number of shares issued x Issue price
Total amount received = 2,000 x Rs. 100 = Rs. 2,00,000

The premium on redemption is 10%, which means the preference shares will be redeemed at a price higher than the face value. The redemption price per share can be calculated as follows:
Redemption price per share = Face value + Premium on redemption
Redemption price per share = Rs. 100 + (10/100) x Rs. 100 = Rs. 100 + Rs. 10 = Rs. 110

The total amount required to redeem all the preference shares can be calculated as follows:
Total redemption amount = Number of shares issued x Redemption price per share
Total redemption amount = 2,000 x Rs. 110 = Rs. 2,20,000

Equity Shares
- Number of equity shares issued: 1,500
- Face value of equity shares: Rs. 100 each
- Premium on issue: 20%

The total amount received from the issue of equity shares can be calculated as follows:
Total amount received = Number of shares issued x Issue price
Total amount received = 1,500 x (Face value + Premium on issue)
Total amount received = 1,500 x (Rs. 100 + (20/100) x Rs. 100) = 1,500 x Rs. 120 = Rs. 1,80,000

Transfer to Capital Redemption Reserve Account
The amount to be transferred to the Capital Redemption Reserve (CRR) account is equal to the excess of the total redemption amount over the total amount received from the issue of equity shares.

Transfer to CRR account = Total redemption amount - Total amount received from equity shares
Transfer to CRR account = Rs. 2,20,000 - Rs. 1,80,000 = Rs. 40,000

Therefore, the amount to be transferred by the company to the Capital Redemption Reserve (CRR) account is Rs. 40,000.
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S Ltd. issued 2,000, 10% Preference shares of Rs. 100 each at par, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 Equity Shares of Rs. 100 each at a premium of 20% per share. At the time of redemption of Preference shares, the amount to be transferred by the company to the Capital Redemption Reserve Account =?a)Rs. 50,000b)Rs. 40,000c)Rs. 2,00,000d)Rs. 2,20,000Correct answer is option 'A'. Can you explain this answer?
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S Ltd. issued 2,000, 10% Preference shares of Rs. 100 each at par, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 Equity Shares of Rs. 100 each at a premium of 20% per share. At the time of redemption of Preference shares, the amount to be transferred by the company to the Capital Redemption Reserve Account =?a)Rs. 50,000b)Rs. 40,000c)Rs. 2,00,000d)Rs. 2,20,000Correct 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 S Ltd. issued 2,000, 10% Preference shares of Rs. 100 each at par, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 Equity Shares of Rs. 100 each at a premium of 20% per share. At the time of redemption of Preference shares, the amount to be transferred by the company to the Capital Redemption Reserve Account =?a)Rs. 50,000b)Rs. 40,000c)Rs. 2,00,000d)Rs. 2,20,000Correct 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 S Ltd. issued 2,000, 10% Preference shares of Rs. 100 each at par, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 Equity Shares of Rs. 100 each at a premium of 20% per share. At the time of redemption of Preference shares, the amount to be transferred by the company to the Capital Redemption Reserve Account =?a)Rs. 50,000b)Rs. 40,000c)Rs. 2,00,000d)Rs. 2,20,000Correct answer is option 'A'. Can you explain this answer?.
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