Multiple choice

10,000 7% Redeemable Preference Shares of Rs. 10 each fully paid in XYZ Ltd. are outstanding. These shares are redeemed at Rs. 11 each & 1,000 Equity Shares of Rs. 100 each are issued at Rs. 115 for cash for the redemption.

How to write off the Premium on Redemption of 7% Redeemable Preference Shares?

  1. Premium on Redemption of 7% Redeemable Preference Shares A/c 10,000 To 7% Redeemable Preference Shares A/c 10,000

  2. Bank A/c Rs. 10,000 To Premium on Redemption of 7% Redeemable Preference Shares A/c 10,000

  3. Securities Shares A/c Rs. 10,000 To Premium on Redemption of 7% Redeemable Preference Shares A/c 10,000

  4. Profit and Loss Appropriation Rs. 10,000 To Premium on Redemption of 7% Redeemable Preference Shares A/c 10,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 If shares are redeemable at a premium then such a premium must be provided for out of the Company's Securities Shares A/c.

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