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Issue of Shares at Discount

The balance o...

Question

The balance of Securities Premium Account can be utilized _______________________.

A

To issue fully paid bonus shares to creditors.

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B

To write off development expenditure.

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C

To provide for the premium payable on the buy-back of equity shares.

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D

None of the above

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Solution

The correct option is D None of the above
The account can only be used for such specific purposes and no other purpose. To issue fully paid-up bonus shares to its existing shareholders. The balance canalso be used to provide for the premium that is payable on the redemption of debentures or of preference shares of the company.

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Similar questions

Q. Consider the following statements:
1. The bonus shares shall not be issued in lieu of dividend,
2. A company may issue fully paid up bonus shares to its members out of its 'Capital Redemption Reserve Account'
3. A company may not issue bonus shares out of its 'Securities Premium Account'
Which of the above statement/s is are not correct?

Q. X ltd provides the following information:

12% Preference Shares of Rs 10 each	6,00,000
General reserve	3,00,000
Profit and loss account	5,00,000
Securities Premium	70,000
Investments	4,50,000
Cash	1,00,000

The 12% preference shares are redeemable at a premium of 10%. The company wishes to maintain the cash balance at Rs 50,000. For the purpose of redemption of preference shares, It proposed to sell the investment for Rs 4,00,000. The company proposes to issue a sufficient number of equity shares of Rs 100 each at a premium of 5% to raise required cash resources.
The balance of Securities Premium Account after adjusting premium on redemption of pref. Shares is ________.

10, 000

equity shares of Rs.

10

each were issued to public at a premium of Rs.

2

per share. Applications were received for

12, 000

shares. Amount of securities premium account will be ________.

Q. Assertion :Under the provisions of new Company Act 2013, a company may issue fully paid-up bonus shares out of its free reserves, security premium account and the capital redemption reserve account. Reason: According to the new provisions of Company Act, 2013, no issue of bonus shares shall be made by capitalising reserves created by the revaluation of assets.

Q. X Ltd. decides to redeem 650, 15% Pref. Shares of Rs. 100 each at 10% premium. It has a General Reserve of Rs. 45,500 and a Securities Premium of Rs. 1,000. If the new equity shares are to be issued at 30% premium, the minimum number of equity shares of Rs 10 each to be issued for the purpose of redemption is ________.

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