Question

A company wishes to redeem its preference shares amounting to Rs. 1,00,000 at a premium of 5% and for this purpose issues 5,000 equity shares of Rs. 10 each at a premium of 5%. The company also has a balance of Rs. 1,00,000 as General Reserves and Rs. 50,000 in profit and loss account. The amount to be transferred to Capital Redemption Reserve account for the purpose of redemption is ____________.

• A. Rs. 47,500
• B. Rs. 50,000
• C. Rs. 52,500
• D. Rs. 1,05,000

Answer 1

The correct option is B Rs. 50,000

b'Preference shares 1,00,000

Less - equity shares 50,000

[5,000 x 10 each]

Capital redemption reserve 50,000.

'