Question

O Ltd. has redeemed its 12% preference shares of Rs. 2,00,000 at a premium of 4%. To meet the redemption it has issued Rs. 1,98,000 shares of Rs. 10 each at a premium of 5%. The balance outstanding to the credit of share premium account after adjusting premium on redemption of preference shares will be __________.

• A. Rs. Nil
• B. Rs. 1,904
• C. Rs. 1,900
• D. Rs. 8000

Answer 1

The correct option is C Rs. 1,900

12% preference shares of Rs. 2,00,000 at premium of 4% [2,00,000 x 4% =8000]

Redemption issued Rs.1,98000 shares at premium of 5% [ 1,98,000 x 5%=9,900]

Adjusted premium on redemption of preference = Rs. 9,900 - 8,000 = Rs. 1,900.

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