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CMA Intermediate · Financial Management and Business Data Analytics · Fund Flow Statement - Preparation and Analysis

Kiran Ltd issued 10,000 equity shares of Rs 10 each at a premium of Rs 5 and used Rs 1,20,000 of the proceeds to redeem 12% debentures at par. In the fund flow statement, how will these be shown?

Share issue is a source of Rs 1,50,000, being 10,000 shares at Rs 15 including premium, and debenture redemption is a separate application of Rs 1,20,000. The two flows are shown gross, and the premium must be included in the source.

  1. ASource Rs 1,50,000 from share issue; application Rs 1,20,000 for debenture redemptionCorrect
  2. BSource Rs 1,00,000 from share issue; application Rs 1,20,000
  3. CSource Rs 30,000 net from share issue only
  4. DSource Rs 1,50,000; application Rs 1,50,000

Explanation

Total receipt is 10,000 x 15 = Rs 1,50,000, including the premium, which is a source. Redemption of debentures is a separate application of Rs 1,20,000. Showing only Rs 1,00,000 omits the premium, and netting the items hides both flows.

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