Question

A Ltd. had 3,000, 12% Redeemable Preference Shares of Rs. 100 each fully paid up. The company issued 25,000 equity shares of Rs. 10 each at par and 1,000, 14% Debentures of Rs. 100 each. The amount to be transferred to Capital Redemption A/c will be __________.

• A. Nil
• B. Rs. 50,000
• C. Rs. 2,00,000
• D. Rs. 3,00,000

Answer 1

The correct option is B Rs. 50,000

If the company issues any fresh shares for redemption purpose, the transferred amount will be the difference between nominal value of shares redeemed and the nominal value of shares issued (i.e. amount transferred to CRR = Nominal value of shares redeemed – Nominal value of shares issued). The capital redemption reserve account can be used for issuing fully paid bonus shares. Here, Nominal value of shares redeemed is Rs 100*3,000 i.e. Rs 3,00,000 and nominal value of shares issued is Rs 10*25,000 i.e. Rs 2,50,000. Hence, the amount to be transferred to Capital Redemption A/c will be Rs 3,00,000-Rs 2,50,000 i.e. Rs 50,000