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Issue of Shares at Discount

For which of ...

Question

For which of the following purposes share premium of the company can not be used in case the company issues share at premium?

A

For writing off loss as sale and assets.

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B

For the issue of fully paid bonus shares to the members of the company.

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C

For writing off preliminary expenses of the company.

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D

For providing premium payable on the redemption of any redeemable preferences shares or debentures of the company.

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Solution

The correct option is A For writing off loss as sale and assets.
In providing for the premium payable on redemption of any redeemable preference shares, or of any debentures of the company. As such, premium on issues of shares cannot be treated as 'proceeds'; hence the same cannot be utilised for the purpose of nominal value of preference shares redeemed.

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Similar questions

Q. Consider the following statements:
1. The bonus shares shall not be issued in lieu of dividend,
2. A company may issue fully paid up bonus shares to its members out of its 'Capital Redemption Reserve Account'
3. A company may not issue bonus shares out of its 'Securities Premium Account'
Which of the above statement/s is are not correct?

Q. Solid ltd. issued 2,000, 10% preference shares of Rs. 100 each at par, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 equity shares of Rs. 100 each at a premium of 20% per share. At the time of redemption of preference shares, the amount to be transferred by the company to the Capital Redemption Reserve Account will be-

Q. S Ltd. issued

2, 000

10 %

Preference shares of Rs.

100

each at par, which are redeemable at a premium of

10 %

. For the purpose of redemption, the company issued

1, 500

Equality Shares of Rs.

100

each at a premium of

20 %

per share. At the time of redemption of Preference Shares, the amount to be transferred by the company to the Capital Redemption Reserve Account will be________.

Q. ___________ is used to writing off capital losses or issue of bonus shares in case of a company.

Q. X ltd provides the following information:

12% Preference Shares of Rs 10 each	6,00,000
General reserve	3,00,000
Profit and loss account	5,00,000
Securities Premium	70,000
Investments	4,50,000
Cash	1,00,000

The 12% preference shares are redeemable at a premium of 10%. The company wishes to maintain the cash balance at Rs 50,000. For the purpose of redemption of preference shares, It proposed to sell the investment for Rs 4,00,000. The company proposes to issue a sufficient number of equity shares of Rs 100 each at a premium of 5% to raise required cash resources. The premium on issue of fresh equity shares is __________.

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