Question

From the following details calculate the number of equity shares of Rs. $10$ each to be issued in order to redeem the preference shares.
$11\%$ Redeemable preference shares of Rs. $10$ each $=$ Rs. $150,000$
Security premium A/c $=$ Rs. $15,000$
General Reserve A/c $=$ Rs. $15,000$
Profit and loss A/c $=$ Rs. $35,000$
Redeemable preference shares are to be redeemed at $10\%$ premium.

• A. $12,000$
• B. $10,000$
• C. $11,000$
• D. $13,500$

Answer 1

The correct option is B $10,000$

Total amount require to redeem 11% Redeemable preference share

= 150,000 + 10% of 150000 = 165000

Following reserve and security premium can be used to redeem=

Security premium 15,000

General Reserve 15,000

Profit & Loss 35,000

Total 65,000

Equity share to be issued for remaining amount = 165000 - 65000 = 100000

Number of new equity share = 100000 ÷ 10 = 10000