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Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______
- a)Rs. 10,00,000.
- b)Rs. 12,00,000.
- c)Rs. 8,00,000.
- d)Nil.
Correct answer is option 'D'. Can you explain this answer?
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Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs....
Redemption of Preference Shares by Issuing Equity Shares
Calculation of Amount to be Transferred to Capital Redemption Reserve Account
No amount is to be transferred to the Capital Redemption Reserve Account in the given case.
Explanation:
When a company decides to redeem its preference shares, it can do so by:
- Paying cash to the preference shareholders, or
- Issuing new shares in lieu of cash, or
- A combination of both.
In the given case, Ankush Ltd. has decided to redeem its preference shares by issuing equity shares of Rs. 10 each at a premium of Rs. 2 per share. This means that for every preference share of Rs. 100, the company will issue 12 equity shares (10 shares at Rs. 10 each and 2 shares as premium).
The issue of equity shares in lieu of preference shares will not result in any transfer to the Capital Redemption Reserve Account. This is because, as per the Companies Act, 2013, the Capital Redemption Reserve Account is required to be credited only when the preference shares are redeemed out of profits, or out of the proceeds of a fresh issue of shares. In the given case, the preference shares are being redeemed by issuing equity shares, and not out of profits or fresh issue of shares. Hence, no amount is required to be transferred to the Capital Redemption Reserve Account.
Thus, the correct answer is option 'D' - Nil.
Calculation of Amount to be Transferred to Capital Redemption Reserve Account
No amount is to be transferred to the Capital Redemption Reserve Account in the given case.
Explanation:
When a company decides to redeem its preference shares, it can do so by:
- Paying cash to the preference shareholders, or
- Issuing new shares in lieu of cash, or
- A combination of both.
In the given case, Ankush Ltd. has decided to redeem its preference shares by issuing equity shares of Rs. 10 each at a premium of Rs. 2 per share. This means that for every preference share of Rs. 100, the company will issue 12 equity shares (10 shares at Rs. 10 each and 2 shares as premium).
The issue of equity shares in lieu of preference shares will not result in any transfer to the Capital Redemption Reserve Account. This is because, as per the Companies Act, 2013, the Capital Redemption Reserve Account is required to be credited only when the preference shares are redeemed out of profits, or out of the proceeds of a fresh issue of shares. In the given case, the preference shares are being redeemed by issuing equity shares, and not out of profits or fresh issue of shares. Hence, no amount is required to be transferred to the Capital Redemption Reserve Account.
Thus, the correct answer is option 'D' - Nil.
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Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______a)Rs. 10,00,000.b)Rs. 12,00,000.c)Rs. 8,00,000.d)Nil.Correct answer is option 'D'. Can you explain this answer?
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Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______a)Rs. 10,00,000.b)Rs. 12,00,000.c)Rs. 8,00,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______a)Rs. 10,00,000.b)Rs. 12,00,000.c)Rs. 8,00,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______a)Rs. 10,00,000.b)Rs. 12,00,000.c)Rs. 8,00,000.d)Nil.Correct answer is option 'D'. Can you explain this answer?.
Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______a)Rs. 10,00,000.b)Rs. 12,00,000.c)Rs. 8,00,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______a)Rs. 10,00,000.b)Rs. 12,00,000.c)Rs. 8,00,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______a)Rs. 10,00,000.b)Rs. 12,00,000.c)Rs. 8,00,000.d)Nil.Correct answer is option 'D'. Can you explain this answer?.
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