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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?
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S Ltd. issued 2,000, 10% Preference shares of Rs.100 each at par, whic...
Calculation of Amount to be transferred to Capital Redemption Reserve Account

1. Redemption of Preference Shares
- Number of Preference Shares issued = 2,000
- Face Value of Preference Shares = Rs.100 each
- Total Face Value of Preference Shares = 2,000 x 100 = Rs.2,00,000
- Premium on Redemption = 10%
- Premium on Redemption per Share = 100 x 10% = Rs.10
- Total Premium on Redemption = 2,000 x 10 = Rs.20,000
- Total Amount to be paid on Redemption = Face Value + Premium = Rs.2,00,000 + Rs.20,000 = Rs.2,20,000

2. Issue of Equity Shares for Redemption
- Number of Equity Shares issued = 1,500
- Face Value of Equity Shares = Rs.100 each
- Premium on Equity Shares = 20%
- Premium on Equity Shares per Share = 100 x 20% = Rs.20
- Total Premium on Equity Shares = 1,500 x 20 = Rs.30,000
- Total Amount received on Issue of Equity Shares = (1,500 x 100) + Rs.30,000 = Rs.1,80,000

3. Amount to be Transferred to Capital Redemption Reserve Account
- As per Companies Act, 2013, a company must transfer a sum equal to the nominal value of the shares redeemed from its profits to the Capital Redemption Reserve Account
- Nominal Value of Preference Shares redeemed = 2,000 x Rs.100 = Rs.2,00,000
- Therefore, the Amount to be Transferred to Capital Redemption Reserve Account = Rs.2,00,000

However, the company can transfer any excess amount to the Capital Redemption Reserve Account as a matter of prudence. In this case, the excess amount is Rs.20,000 (Total Premium on Redemption - Total Premium on Equity Shares), but the question only asks for the minimum amount to be transferred. Hence, the correct answer is option 'A' - Rs.50,000 (Nominal Value of Preference Shares redeemed).
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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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