CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
Zenith Ltd has 4,00,000 equity shares of Rs 10 each fully paid. It announces bonus shares in the ratio 1:4 out of securities premium account of Rs 15,00,000, and all legal conditions are met. What is the balance of securities premium account after the issue?
The securities premium account balance is Rs 5,00,000. A 1:4 bonus on 4,00,000 shares gives 1,00,000 new shares of Rs 10 each, so Rs 10,00,000 is capitalised from the Rs 15,00,000 premium balance, leaving Rs 5,00,000.
- ARs 5,00,000
- BRs 10,00,000Correct
- CRs 11,00,000
- DRs 14,00,000
Explanation
Bonus shares = 4,00,000 x 1/4 = 1,00,000 shares. Face value = 1,00,000 x 10 = Rs 10,00,000. Securities premium falls to 15,00,000 - 10,00,000 = Rs 5,00,000. Rs 10,00,000 would be the amount capitalised, not the balance.
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