Question

A company issued $20,000$ preference shares at the rate of Rs. $100$ each at $5\%$ premium and $2,00,000$ equity shares at the Rs. $10\%$ premium. What is the net amount of securities premium?

• A. Rs. $1,00,000$
• B. Rs. $2,00,000$
• C. Rs. $2,40,000$
• D. Rs. $3,00,000$

Answer 1

The correct option is D Rs. $3,00,000$

Security premium is the extra amount charged per share by the company for future uses.

$Premiumonpreferenceshares=\frac{premium}{100}\times IssueAmount$

Substitute the values in above equation

$Premiumonpreferenceshares=\frac{5}{100}\times Rs20,00,000=Rs1,00,000$

$Premiumonequityshares=\frac{premium}{100}\times IssueAmount$

Substitute the values in above equation

$Premiumonequityshares=\frac{10}{100}\times Rs20,00,000=Rs2,00,000$

$Securitypremiumamount=Rs1,00,000+Rs2,00,000=Rs3,00,000$.