Multiple choice

20,000 10% Redeemable Preference Shares of Rs. 100 each fully paid in SR Ltd. are outstanding. These shares are redeemed at Rs. 110 each & 1,000 Equity Shares of Rs. 100 each are issued at Rs. 120 for cash for the redemption. The balance of Profit and Loss Appropriation A/c is Rs. 12,00,000. What is the amount of Profits utilized to write off Premium on Redemption of 10% Redeemable Preference Shares A/c?

  1. Rs. 2,00,000

  2. Rs. 1,80,000

  3. Rs. 20,000

  4. Rs. 12,00,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Premium of Rs. 2,00,000 payable on redemption & Rs. 20,000 Premium received after fresh issue of shares & Premium of Rs. 2,00,000 payable on redemption to be write off as below: Premium payable on redemption is Rs. 2,00,000 - Premium received on fresh issue of shares Rs. 20,000 = 1,80,000 & this amount write off out of Profits.

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