Question

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-

• A. Rs. 50,000
• B. Rs. 40,000
• C. Rs. 2,00,000
• D. Rs. 2,20,000

Answer 1

The correct option is A Rs. 50,000

In case fresh shares are issued at premium then in such case only nominal value of the share will be transferred to C.R.R. Account and premium will be transferred to "Securities Premium Account".
Amount to be transferred to Capital Redemption Reserve:
Face value of shares redeemed (2,000 X 100) = 2,00,000
Less: Proceeds from new issue (1,500 X 100) = 1,50,000
50,000