Question

If for the redemption of preference share capital of Rs. 1,00,000, 5,000 equity shares of Rs. 10 each are issued at a discount of 10%, the amount to be transferred to Capital Redemption Reserve Fund will be _________.

• A. Rs. 60,000
• B. Rs. 50,000
• C. Rs. 55,000
• D. Rs. 45,000

Answer 1

The correct option is C Rs. 55,000

5,000 equity shares of Rs. 10 = Rs. 5,000 x 10 = Rs. 50,000.

At discount of 10% = Rs. [50,000 x 10%] = Rs. 5,000.

Rs. 50,000 - Rs. 5,000 = Rs. 45,000.

Capital redemption reserve = Rs. 1,00,000 - Rs. 45,000 = Rs. 55,000.