Redeemable Preference Shares of Rs. 2,00,000 are to be redeemed at a premium of 10%. Balance sheet shows profit Rs. 30,000. General Reserve - Rs.

Redeemable Preference Shares of Rs. 2,00,000 are to be redeemed at a premium of 10%. Balance sheet shows profit Rs. 30,000. General Reserve - Rs. 20,000; Share Premium - Rs. 8,000 and Dividend Equalization fund Rs.50,000. How much fresh capital should be issued in order to comply with the provisions of Sec.80 of the companies act, 1956?

A. Rs. 2,00,000

B. Rs. 2,12,000

C. Rs. 2,62,000

D. Rs. 1,12,000

Expert Solution

Correct option is D)

Explanation:

As per section 80 of the Companies Act 1956, company can redeem preference shares only out of fresh issue or profits that are available for distribution as dividends. In case, there is premium to be paid on redemption it should be paid out of profit available for paying dividends or out of securities premium account.

Amount to be paid on redemption = 2,00,000 + 20,000 ( 10% of 2,00,000)

= 2,20,000

Amount of fresh issue = Amount to be paid on redemption - (Free reserves + securities premium reserve)

= 2,20,000 - ( 30,000 + 20,000 + 8,000 + 50,000)

= Rs-1,12,000.

Correct option is D)

Junaid answered 1 year ago

Premium received on issue of shares are shown under the head _________ in Balance Sheet.

Premium received on issue of shares are shown under the head _________ in Balance Sheet.A. Reserve and SurplusB. Current liabilities and ProvisionsC. Share CapitalD. Contingent Liabilities

provided the following data at year-end: 10% Preference share capital, 30,000 shares, P90 par value 2,700,000...

provided the following data at year-end: 10% Preference share capital, 30,000 shares, P90 par value 2,700,000 12% Preference share capital, 20,000 shares, P250 par value 5,000,000 Ordinary share capital, 80,000 shares, P60 par value 4,800,000 Retained earnings 1,540,000 Share premium 2,800,000 The 10% preference share is cumulative and participating. The 12% preference share is noncumulative and participating. Dividends are in arrears for 3 years. What is the book value of the following shares: 1. Ordinary Shares 2. 10% Preference Shares...

Using the spreadsheet, setup the balance sheet for Eagle Bank when the reserve requirement is 10%:...

Using the spreadsheet, setup the balance sheet for Eagle Bank when the reserve requirement is 10%: Equity 20, Securities 70, Savings deposits 10, Personal Loans 40, Retained earnings 20, Time deposits 30, Home mortgages 60, Demand deposits 100. Assets Liabilities Securities 70 Equity 20 Personal Loans 40 Savings Deposits 10 Home Mortgages 60 Retained Earnings 20 Cash reserves (10% of deposits) 14 Time Deposits 30 Cash with bank 96 Demand Deposits 100 Total 280 Total 280 I am confused on...

The market value balance sheet of “DotCom Bank” shows that it has: $ 10 million deposits...

The market value balance sheet of “DotCom Bank” shows that it has: $ 10 million deposits in checking account deposits with a duration of 2 months $ 5 million in cash with zero duration $ 25 million in short - term time deposit accounts with a duration of 1 year $ 50 million in medium term time deposit accounts with a duration of 2.5 years $ 5 million in accounts - receiv ables backed loans with a duration of 1.5...

Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10...

Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10 percent to 5 percent. By how much will bank deposits increase? Provide your answer in dollars measured in thousands rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer. Assets Liabilities Reserves $10 thousand Deposits $100 thousand Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10 percent to...

Sam Co.’s current balance sheet shows total common equity of $525,000. It has 99,000 shares of...

Sam Co.’s current balance sheet shows total common equity of $525,000. It has 99,000 shares of stock outstanding, and they sell at a price of $26.50 per share. By how much do the firm's market and book values per share differ? a. $21.197 b. $20.084 c. $19.119 d. $18.069 Swinnerton Clothing Company's balance sheet showed total current assets of $900, all of which were required in operations. Its current liabilities consisted of $200 of accounts payable, $500 of...

Question