CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital
Arya Ltd redeems 10,000 preference shares of Rs 100 each, fully paid, at a premium of 10%. It makes a fresh issue of 4,000 equity shares of Rs 100 each at par for the purpose, and the remainder is met from profits. Ignoring the premium, what amount is transferred to CRR?
Rs 6,00,000 is transferred to CRR. Nominal value redeemed is Rs 10,00,000, of which Rs 4,00,000 is met from fresh issue proceeds. CRR must equal the nominal amount redeemed out of profits, that is the balance of Rs 6,00,000, and the premium is not included.
- ARs 10,00,000
- BRs 4,00,000
- CRs 6,00,000Correct
- DRs 6,60,000
Explanation
Nominal value redeemed is 10,000 x 100 = Rs 10,00,000. Fresh issue proceeds are 4,000 x 100 = Rs 4,00,000. The amount redeemed out of profits is the balance, so the CRR transfer is Rs 6,00,000. Rs 6,60,000 wrongly includes the premium of 10% on the profit portion.
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