Question

Company having undistributed prom
Rs. 500000. Company decided to
issue 10000 fully paid bonus shares
of Rs. 10 at a premium of Rs 2 per
share. Undistributed profit utilized
Rs.​

Answer 1

Explanation:

Answer

Nominal Value of preference shares + premium on redemption = Existing securities premium + divisible profits available for redemption + sale proceeds of fresh issue of new shares

Therefore, Rs 1,00,000+ Rs 10,000 = Rs 5,000 + Rs 65,000 + X

Hence, X is Rs 40,000. So, the minimum number of equity shares to be issued for the purpose of redemption if new equity shares are to be issued at 20% premium having face value of Rs. 10 each will be Rs 40,000/Rs 10 i.e. 4,000.