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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:
- a)Rs. 20,000
- b)Rs. 28,000
- c)Rs. 1,00,000
- d)Rs. 80,000
Correct answer is option 'B'. Can you explain this answer?
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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for w...
Redemption of Preference Shares and Issue of Fresh Equity Shares
To understand the amount transferred to the Capital Redemption Reserve, let's break down the given information and analyze the transactions step by step:
1. Redemption of Preference Shares:
- Redeemable preference shares worth Rs. 1,00,000 are being redeemed at par.
- This means that the preference shares are being repurchased at their face value of Rs. 1,00,000.
2. Issue of Fresh Equity Shares:
- Fresh equity shares worth Rs. 80,000 are being issued.
- These equity shares are being issued at a discount of 10%.
- This means that the issue price of each equity share is 90% of its face value.
- Face value of each equity share = Rs. 80,000 / (90/100) = Rs. 88,888.88 (approx.)
3. Calculation of Capital Redemption Reserve:
- The Capital Redemption Reserve is created to account for the premium on redemption of preference shares.
- The amount transferred to the Capital Redemption Reserve is calculated as the difference between the redemption price and the face value of the preference shares redeemed.
Redemption price of preference shares = Rs. 1,00,000
Face value of preference shares = Rs. 1,00,000
Premium on redemption = Redemption price - Face value
= Rs. 1,00,000 - Rs. 1,00,000
= Rs. 0
Since the premium on redemption is zero, there is no amount transferred to the Capital Redemption Reserve.
Conclusion:
Based on the given information, the amount transferred to the Capital Redemption Reserve is zero. Therefore, the correct answer is option 'B' - Rs. 28,000.
To understand the amount transferred to the Capital Redemption Reserve, let's break down the given information and analyze the transactions step by step:
1. Redemption of Preference Shares:
- Redeemable preference shares worth Rs. 1,00,000 are being redeemed at par.
- This means that the preference shares are being repurchased at their face value of Rs. 1,00,000.
2. Issue of Fresh Equity Shares:
- Fresh equity shares worth Rs. 80,000 are being issued.
- These equity shares are being issued at a discount of 10%.
- This means that the issue price of each equity share is 90% of its face value.
- Face value of each equity share = Rs. 80,000 / (90/100) = Rs. 88,888.88 (approx.)
3. Calculation of Capital Redemption Reserve:
- The Capital Redemption Reserve is created to account for the premium on redemption of preference shares.
- The amount transferred to the Capital Redemption Reserve is calculated as the difference between the redemption price and the face value of the preference shares redeemed.
Redemption price of preference shares = Rs. 1,00,000
Face value of preference shares = Rs. 1,00,000
Premium on redemption = Redemption price - Face value
= Rs. 1,00,000 - Rs. 1,00,000
= Rs. 0
Since the premium on redemption is zero, there is no amount transferred to the Capital Redemption Reserve.
Conclusion:
Based on the given information, the amount transferred to the Capital Redemption Reserve is zero. Therefore, the correct answer is option 'B' - Rs. 28,000.
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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct answer is option 'B'. Can you explain this answer?
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Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct 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 Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct 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 Redeemable Preference shares of Rs. 1,00,000 are redeemed at par for which fresh equity shares of Rs. 80,000 are issued at discount of 10%. The amount transferred to Capital Redemption Reserve will be:a)Rs. 20,000b)Rs. 28,000c)Rs. 1,00,000d)Rs. 80,000Correct answer is option 'B'. Can you explain this answer?.
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