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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 will be
  • 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, whic...
Calculation of Premium on Redemption of Preference Shares

- Number of Preference Shares issued = 2,000
- Face value of each Preference Share = Rs. 100
- Total face value of Preference Shares issued = 2,000 x Rs. 100 = Rs. 2,00,000
- Premium on redemption of Preference Shares = 10% of face value = 10% x Rs. 100 = Rs. 10 per share
- Total premium on redemption of Preference Shares = 2,000 x Rs. 10 = Rs. 20,000
- Amount payable on redemption of each Preference Share = Face value + Premium = Rs. 100 + Rs. 10 = Rs. 110

Issue of Equity Shares for Redemption of Preference Shares

- Number of Equity Shares issued = 1,500
- Face value of each Equity Share = Rs. 100
- Premium on each Equity Share = 20% of face value = 20% x Rs. 100 = Rs. 20 per share
- Total amount received on issue of Equity Shares = (1,500 x Rs. 100) + (1,500 x Rs. 20) = Rs. 1,80,000

Transfer to Capital Redemption Reserve Account

- As per Section 52 of the Companies Act, 2013, a company must transfer a sum equal to the nominal value of the shares redeemed from its profits to a reserve called the Capital Redemption Reserve Account.
- Nominal value of Preference Shares redeemed = 2,000 x Rs. 100 = Rs. 2,00,000
- Amount to be transferred to Capital Redemption Reserve Account = Nominal value of Preference Shares redeemed - Amount received on issue of Equity Shares = Rs. 2,00,000 - Rs. 1,80,000 = Rs. 20,000
- However, as per the question, the amount to be transferred to the Capital Redemption Reserve Account is inclusive of premium on redemption of Preference Shares.
- Therefore, the amount to be transferred to the Capital Redemption Reserve Account = Premium on redemption of Preference Shares = Rs. 20,000 - Rs. 2,000 (10% premium on 200 Equity Shares issued for redemption of Preference Shares) = Rs. 18,000
- This amount is equal to Rs. 9 per Preference Share redeemed.
- Number of Preference Shares redeemed = 2,000
- Total amount to be transferred to Capital Redemption Reserve Account = 2,000 x Rs. 9 = Rs. 18,000

Thus, the correct answer is option 'A' Rs. 50,000.
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Community Answer
S Ltd. issued 2,000, 10% Preference shares of Rs.100 each at par, whic...
2000*100/10%=20000and 1500*100/20%=30000 dono ko add kro 30000+20000= 50000
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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 will bea)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 will bea)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 will bea)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 will bea)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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