The purchasing company agreed to issue 15000 equity shares of rupees 10 each at a premium of rupees 1 each 6000 6% debenture of rupees 10 each at a discount of 5% in addition to this it would also pay cash equal to the face value of shares and debentures issued
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LEGAL STUDIES
Ajay Ltd. decided to redeem 10,000 Preference shares of Rs. 10 each at 10% premium. Balance in profit & loss account is Rs. 65,000 and in securities premium accountis Rs. 5,000. You are required to calculate 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.
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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.