Question

Ram had 2000 preferred shares
and 5000 ordinary shares of a
company of par value Rs. 10
each. If the dividend declared on
preferred shares is 20% and is
12% on ordinary shares,find the
annual dividend received by
Ram.​

Answer 1

Answer:

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.