Question

S Ltd. had 9,000, 8% preference shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par by the issue of sufficient number of equity shares. How many equity shares are required to be issued if new equity shares are to be issued at Rs. 12 for a premium including Rs. 2?

A
90,000
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B
1,00,000
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C
75,000
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D
93,333
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Solution

The correct option is A 90,000Here, number of shares is 9000 at Rs 100 each which makes the amount on shares to be Rs 9,00,000. In order to issue new shares at Rs 12 each which includes premium of Rs 2 we have to exclude the premium as it cannot be used for the redemption of shares and hence, the number of shares required is Rs 9,00,000/Rs 10 i.e. Rs 90,000.

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