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An Ltd. has 20,000 Equity Shares of ₹ 10 each. The Balance of the Profit & Loss Account is ₹ 1,40,000. It has issued 6% Debentures in the past of ₹ 1,20,000.
At the annual general meeting, it was resolved that:
(i) To pay a dividend of 10% in cash. The corporate dividend tax rate is 17%.
(ii) To issue 1 bonus share for every 4 shares held after 1 month of right issue.
(iii) To give existing shareholders the right to purchase one ₹ 10 shares for every 4 shares prior to bonus issue.
(iv) To repay debentures at a premium of 596.
Balance of Profit & Loss A/c after giving effect to the above transactions will be
  • a)
    ₹ 48,100
  • b)
    ₹ 54,100
  • c)
    ₹ 52,000
  • d)
    ₹ 65,100
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
An Ltd. has 20,000 Equity Shares of 10 each. The Balance of the Profi...
Detailed


  • Calculate the total dividend payable:


    • Number of equity shares = 20,000

    • Dividend rate = 10%

    • Dividend per share = ₹10 x 10% = ₹1

    • Total dividend payable = ₹1 x 20,000 = ₹20,000


  • Calculate the dividend tax:


    • Dividend tax rate = 17%

    • Dividend tax amount = 17% of ₹20,000 = ₹3,400


  • Calculate the total bonus shares to be issued:


    • Total number of equity shares after bonus issue = 20,000 + (20,000/4) = 25,000

    • Number of bonus shares = 25,000 - 20,000 = 5,000


  • Calculate the premium on debentures:


    • Debentures to be repaid = ₹1,20,000

    • Premium on debentures = 6% of ₹1,20,000 = ₹7,200


  • Calculate the final balance of Profit & Loss Account:


    • Initial balance of Profit & Loss Account = ₹1,40,000

    • Total dividend paid = ₹20,000

    • Dividend tax paid = ₹3,400

    • Debentures premium paid = ₹7,200

    • Final balance = ₹1,40,000 - ₹20,000 - ₹3,400 - ₹7,200 = ₹1,09,400



Therefore, the balance of the Profit & Loss Account after giving effect to the above transactions will be ₹ 1,09,400.
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An Ltd. has 20,000 Equity Shares of 10 each. The Balance of the Profi...
Calculation of Balance of Profit & Loss A/c after Resolutions:
1. Dividend Distribution:
- Total Equity Shares = 20,000 shares
- Dividend declared = 10% of face value = 10% of 10 = 1 per share
- Total Dividend = 20,000 * 1 = 20,000
- Corporate dividend tax = 17% of 20,000 = 3,400
- Net Dividend paid = 20,000 - 3,400 = 16,600
2. Bonus Issue:
- Bonus shares to be issued = 1 for every 4 shares
- Total bonus shares = 20,000 / 4 = 5,000 shares
- Face value of bonus shares = 5,000 * 10 = 50,000
3. Right Issue:
- Existing shareholders have the right to purchase 1 share for every 4 shares held
- Total new shares issued = 20,000 / 4 = 5,000 shares
- Face value of new shares = 5,000 * 10 = 50,000
4. Debenture Repayment:
- Debentures to be repaid = 1,20,000
- Premium to be paid = 596 * 1,20,000 = 71,520
5. Final Calculation:
- Balance in Profit & Loss A/c = 1,40,000
- Total cash outflow = Dividend + Debenture premium = 16,600 + 71,520 = 88,120
- Total shares issued = Bonus shares + New shares = 50,000 + 50,000 = 1,00,000
- Total reduction in P&L A/c = Total cash outflow + Total shares issued = 88,120 + 1,00,000 = 1,88,120
- Balance in Profit & Loss A/c after resolutions = 1,40,000 - 1,88,120 = 48,100
Therefore, the balance of Profit & Loss A/c after giving effect to the resolutions will be 48,100.
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An Ltd. has 20,000 Equity Shares of 10 each. The Balance of the Profit & Loss Account is 1,40,000. It has issued 6% Debentures in the past of 1,20,000.At the annual general meeting, it was resolved that:(i) To pay a dividend of 10% in cash. The corporate dividend tax rate is 17%.(ii) To issue 1 bonus share for every 4 shares held after 1 month of right issue.(iii) To give existing shareholders the right to purchase one 10 shares for every 4 shares prior to bonus issue.(iv) To repay debentures at a premium of 596.Balance of Profit & Loss A/c after giving effect to the above transactions will bea) 48,100b) 54,100c) 52,000d) 65,100Correct answer is option 'A'. Can you explain this answer?
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An Ltd. has 20,000 Equity Shares of 10 each. The Balance of the Profit & Loss Account is 1,40,000. It has issued 6% Debentures in the past of 1,20,000.At the annual general meeting, it was resolved that:(i) To pay a dividend of 10% in cash. The corporate dividend tax rate is 17%.(ii) To issue 1 bonus share for every 4 shares held after 1 month of right issue.(iii) To give existing shareholders the right to purchase one 10 shares for every 4 shares prior to bonus issue.(iv) To repay debentures at a premium of 596.Balance of Profit & Loss A/c after giving effect to the above transactions will bea) 48,100b) 54,100c) 52,000d) 65,100Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about An Ltd. has 20,000 Equity Shares of 10 each. The Balance of the Profit & Loss Account is 1,40,000. It has issued 6% Debentures in the past of 1,20,000.At the annual general meeting, it was resolved that:(i) To pay a dividend of 10% in cash. The corporate dividend tax rate is 17%.(ii) To issue 1 bonus share for every 4 shares held after 1 month of right issue.(iii) To give existing shareholders the right to purchase one 10 shares for every 4 shares prior to bonus issue.(iv) To repay debentures at a premium of 596.Balance of Profit & Loss A/c after giving effect to the above transactions will bea) 48,100b) 54,100c) 52,000d) 65,100Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An Ltd. has 20,000 Equity Shares of 10 each. The Balance of the Profit & Loss Account is 1,40,000. It has issued 6% Debentures in the past of 1,20,000.At the annual general meeting, it was resolved that:(i) To pay a dividend of 10% in cash. The corporate dividend tax rate is 17%.(ii) To issue 1 bonus share for every 4 shares held after 1 month of right issue.(iii) To give existing shareholders the right to purchase one 10 shares for every 4 shares prior to bonus issue.(iv) To repay debentures at a premium of 596.Balance of Profit & Loss A/c after giving effect to the above transactions will bea) 48,100b) 54,100c) 52,000d) 65,100Correct answer is option 'A'. Can you explain this answer?.
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