Issue of Shares at Premium

Q. When can a company issue shares at a discount?

Q. Z Ltd . purchased furniture costing ₹ 2, 20, 000 from C.D Ltd. The payment was to be made by issue of 9% Preference Shares of ₹ 100 each ata premium of ₹ 10 per share . Pass necessary Journal entries in the books of Z Ltd.

Q.

When the shares of a company are issued more than its nominal value (face value), the excess amount is called __________.

1. None of the above

2. Discount

3. Premium

4. Interest

Q.

Maximum limit of Premium on shares is?

1. 5%

2. 10%

3. No limit

4. 100%

Q.

Excess of issue price of shares over its face value is termed as ___

1. Discount

2. None of the above

3. Shares call

4. Securities premium

Q.

The face value of a share is Rs 100/-. It is issued at 10% premium. What is the amount of premium?

1. 10

2. 20

3. None of the above

4. 110

Q.

When the issue price is excess than the face value of shares, it is a case of ______

1. Premium

2. Par value

3. Calls in Arrears

4. Calls in advance

Q. $\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & \text{Share Capital A/c}\text{Dr.}& & \underset{–}{\text{(i)}}& \\ & \text{Securities Premium A/c}\text{Dr.}& & \text{4, 000}& \\ & \text{To Share Forfeiture A/c}& & & \text{8, 000}\\ & \text{To Calls in Arrears A/c}& & & \text{14, 000}\\ & \underset{–}{\text{( \_\_\_\_\_ shares forfeited for non-payment of ₹ \_(ii)\_\_\_ including premium of ₹2 per share)}}& & & \\ & \text{Bank A/c}\text{Dr.}& & \underset{–}{\text{(iii)}}& \\ & \text{Shares Forfeiture A/c}\text{Dr.}& & \underset{–}{\text{(iv)}}& \\ & \text{To Share Capital A/c}& & & \underset{–}{\text{(v)}}\\ & \underset{–}{\text{( \_\_\_\_\_\_\_ shares reissued at ₹9 per share, fully paid at ₹10 per share)}}& & & \\ & \text{Share Forfeiture A/c}\text{Dr.}& & \text{1, 400}& \\ & \text{To Capital Reserve A/c}& & & \text{1, 400}\\ & \text{(Net gain on reissued shares transferred to capital reserve)}& & & \\ & & & & \end{array}$

Note: Face value of shares is ₹10 each.

(iv) On reissue of shares, share forfeiture account is debited with:

[2 marks]

1. ₹12, 600
2. ₹14, 000
3. ₹4, 200
4. ₹2, 000

Q. AB limited has issued 5, 000 shares of face value of Rs. 10 each at Rs. 15 each, the amount of premium per share is .

1. Rs. 5, 000
2. Rs. 10
3. Rs. 25, 000
4. Rs. 5

Q.

Securities premium once received __________

1. None of the above

2. Not sure

3. Flase

4. True

Q.

Securities Premium can be demanded -

1. in lump sum or installments on application &/or allotment &/or call

2. only on application

3. only on allotment

4. only on call

Q. Which of these types of companies cannot issue shares at discount?

1. Loss making companies.
2. Companies having outstanding income-tax liabilities.
3. Company in Telecom sector.
4. New company.

Q. AB limited has issued 5, 000 shares of face value of Rs.10 each at Rs.15 each, the amount to be debited in bank account is if received in full.

1. Rs. 5, 000
2. Rs. 10
3. Rs. 75, 000
4. Rs. 5

Q. $\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & \text{Share Capital A/c}\text{Dr.}& & \underset{–}{\text{(i)}}& \\ & \text{Securities Premium A/c}\text{Dr.}& & \text{4, 000}& \\ & \text{To Share Forfeiture A/c}& & & \text{8, 000}\\ & \text{To Calls in Arrears A/c}& & & \text{14, 000}\\ & \underset{–}{\text{( \_\_\_\_\_ shares forfeited for non-payment of ₹ \_(ii)\_\_\_ including premium of ₹2 per share)}}& & & \\ & \text{Bank A/c}\text{Dr.}& & \underset{–}{\text{(iii)}}& \\ & \text{Shares Forfeiture A/c}\text{Dr.}& & \underset{–}{\text{(iv)}}& \\ & \text{To Share Capital A/c}& & & \underset{–}{\text{(v)}}\\ & \underset{–}{\text{( \_\_\_\_\_\_\_ shares reissued at ₹9 per share, fully paid at ₹10 per share)}}& & & \\ & \text{Share Forfeiture A/c}\text{Dr.}& & \text{1, 400}& \\ & \text{To Capital Reserve A/c}& & & \text{1, 400}\\ & \text{(Net gain on reissued shares transferred to capital reserve)}& & & \\ & & & & \end{array}$
Note: Face value of shares is ₹10 each.
(i) The shares were forfeited for non-payment of:

[2 marks]

1. ₹10 per share
2. ₹7 per share
3. ₹9 per share
4. ₹12 per share

Q. $\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & \text{Share Capital A/c}\text{Dr.}& & \underset{–}{\text{(i)}}& \\ & \text{Securities Premium A/c}\text{Dr.}& & \text{4, 000}& \\ & \text{To Share Forfeiture A/c}& & & \text{8, 000}\\ & \text{To Calls in Arrears A/c}& & & \text{14, 000}\\ & \underset{–}{\text{( \_\_\_\_\_ shares forfeited for non-payment of ₹ \_(ii)\_\_\_ including premium of ₹2 per share)}}& & & \\ & \text{Bank A/c}\text{Dr.}& & \underset{–}{\text{(iii)}}& \\ & \text{Shares Forfeiture A/c}\text{Dr.}& & \underset{–}{\text{(iv)}}& \\ & \text{To Share Capital A/c}& & & \underset{–}{\text{(v)}}\\ & \underset{–}{\text{( \_\_\_\_\_\_\_ shares reissued at ₹9 per share, fully paid at ₹10 per share)}}& & & \\ & \text{Share Forfeiture A/c}\text{Dr.}& & \text{1, 400}& \\ & \text{To Capital Reserve A/c}& & & \text{1, 400}\\ & \text{(Net gain on reissued shares transferred to capital reserve)}& & & \\ & & & & \end{array}$

Note: Face value of shares is ₹10 each.

(iii) On reissue of shares, bank account is debited with:

[2 marks]

1. ₹20, 000
2. ₹18, 000
3. ₹24, 000
4. ₹14, 000

Q. $\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & \text{Share Capital A/c}\text{Dr.}& & \underset{–}{\text{(i)}}& \\ & \text{Securities Premium A/c}\text{Dr.}& & \text{4, 000}& \\ & \text{To Share Forfeiture A/c}& & & \text{8, 000}\\ & \text{To Calls in Arrears A/c}& & & \text{14, 000}\\ & \underset{–}{\text{( \_\_\_\_\_ shares forfeited for non-payment of ₹ \_(ii)\_\_\_ including premium of ₹2 per share)}}& & & \\ & \text{Bank A/c}\text{Dr.}& & \underset{–}{\text{(iii)}}& \\ & \text{Shares Forfeiture A/c}\text{Dr.}& & \underset{–}{\text{(iv)}}& \\ & \text{To Share Capital A/c}& & & \underset{–}{\text{(v)}}\\ & \underset{–}{\text{( \_\_\_\_\_\_\_ shares reissued at ₹9 per share, fully paid at ₹10 per share)}}& & & \\ & \text{Share Forfeiture A/c}\text{Dr.}& & \text{1, 400}& \\ & \text{To Capital Reserve A/c}& & & \text{1, 400}\\ & \text{(Net gain on reissued shares transferred to capital reserve)}& & & \\ & & & & \end{array}$

Note: Face value of shares is ₹10 each.

(v) On re-issue of shares, share capital account is credited with:


[2 marks]

1. ₹24, 000
2. ₹14, 000
3. ₹20, 000
4. ₹18, 000

Q. Premium received on new issue of shares cannot be used for redemption of par value of preference shares.

1. True
2. False

Q.

Shares are to be issued at _____ when their issue price is exactly equal to their nominal value.

1. Par

2. Premium

3. None of the above

4. Discount

Q.

Securities premium makes a part of ___________.

1. Goodwill account

2. Share application account

3. Share capital account

4. Securities premium account

Q. $\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & \text{Share Capital A/c}\text{Dr.}& & \underset{–}{\text{(i)}}& \\ & \text{Securities Premium A/c}\text{Dr.}& & \text{4, 000}& \\ & \text{To Share Forfeiture A/c}& & & \text{8, 000}\\ & \text{To Calls in Arrears A/c}& & & \text{14, 000}\\ & \underset{–}{\text{( \_\_\_\_\_ shares forfeited for non-payment of ₹ \_(ii)\_\_\_ including premium of ₹2 per share)}}& & & \\ & \text{Bank A/c}\text{Dr.}& & \underset{–}{\text{(iii)}}& \\ & \text{Shares Forfeiture A/c}\text{Dr.}& & \underset{–}{\text{(iv)}}& \\ & \text{To Share Capital A/c}& & & \underset{–}{\text{(v)}}\\ & \underset{–}{\text{( \_\_\_\_\_\_\_ shares reissued at ₹9 per share, fully paid at ₹10 per share)}}& & & \\ & \text{Share Forfeiture A/c}\text{Dr.}& & \text{1, 400}& \\ & \text{To Capital Reserve A/c}& & & \text{1, 400}\\ & \text{(Net gain on reissued shares transferred to capital reserve)}& & & \\ & & & & \end{array}$
Note: Face value of shares is ₹10 each.
(i) On forfeiture, the share capital account was debited with:

[2 marks]

1. ₹20, 000
2. ₹18, 000
3. ₹24, 000
4. ₹14, 000

Q.

Define Section 53.

Q.

Shares of a company are issued at _______.

1. Discount

2. Premium

3. Par

4. Either at par or premium

Q. A limited company has to redeem redeemable preference shares of the value of Rs. 1, 00, 000 for which the company has issued 3, 000 equity shares of Rs. 10 each at a premium of 10%. The amount to be transferred to capital redemption reserve account will be ___________.

1. Rs. 1, 00, 000
2. Rs. 97, 000
3. Rs. 70, 000
4. Rs. 67, 000

Q. State whether the following statements are True and False.
Shares are always issued at par.

1. True
2. False

Q. Premium received on issue of shares is a __________.

1. Deferred Revenue Receipt
2. Capital receipt
3. Revenue receipt
4. Deferred capital receipt

Q. Premium on redemption of preference shares can be provided out of _________.

1. Securities premium account
2. Capital reserve account
3. General reserve account
4. All of the above

Q. Which of the following is not a condition for issue of shares at a discount?

1. The Memorandum of Association must authorise the company for issue of shares at a discount
2. The issue must be authorised by passing an ordinary resolution in the General Meeting and must be confirmed by the Company Law Board
3. The shares should be a class of shares already issued
4. At least one year must have elapsed since the company was entitled to commence business

Q. The premium amount of the shares is routed through the premium account.

1. securities
2. revenue
3. general
4. capital

Q. Which of the following section of the Companies Act, 2013 prohibits to issue of shares at discount?

1. Section 53
2. Section 54
3. Section 55
4. Section 56

Q. If shares are issued at its face value, it is called as issue at ______.

1. Premium
2. Discount
3. Par
4. None of these