Balance Sheet of Limited as at 31.03.2020 disclosed 30,000 6% Preference Shares of Rs.10 each. The Preference Dividend was in arrears for three years. The preference shareholders agreed to waive 50% of the of the claim. Which of the of the following is correct treatment?
Capital Reduction to be debited by Rs.18,000
Capital Reduction to be debited by Rs.27,000
Capital Reduction to be debited by R54,000
Capital Reduction to be debited by Rs.30000
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Class 12
>>Accountancy
>>Financial Statements of a Company
>>Format of Balance Sheet
>>Redeemable Preference Share...
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Redeemable Preference Shares of Rs. 2,00,000 are to be redeemed at a premium of 10%. Balance sheet shows profit Rs. 30,000. General Reserve - Rs. 20,000; Share Premium - Rs. 8,000 and Dividend Equalization fund Rs.50,000. How much fresh capital should be issued in order to comply with the provisions of Sec.80 of the companies act, 1956?
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Correct option is
D
Rs. 1,12,000
As per section 80 of the Companies Act 1956, company can redeem preference shares only out of fresh issue or profits that are available for distribution as dividends. In case, there is premium to be paid on redemption it should be paid out of profit available for paying dividends or out of securities premium account.
Amount to be paid on redemption = 2,00,000 + 20,000 ( 10% of 2,00,000)
= 2,20,000
Amount of fresh issue = Amount to be paid on redemption - (Free reserves + securities premium reserve)
= 2,20,000 - ( 30,000 + 20,000 + 8,000 + 50,000)
= Rs-1,12,000.