Questions and Answers of Corporate Accounting

Sathya Ltd., issued 12%, 10,000 preference shares of Rs.10 each. The issue was underwritten as follows: Arul—30%; Madan—30%; Ganga—20%. Applications for 8,000 shares were received by the
The Department of Economic Affairs, Ministry of Finance (F 14/1/SE/85-7-5- 85) and SEBI guidelines stipulates that the underwriting commission on shares should not exceed: (a) 5% (c) 10% (b)
Charulatha Ltd. issued 80,000 8% debentures of ₹100 each. Of the issue, 75% were underwritten by Prabhu Brothers. Applications for 60,000 shares were received in all; out of which, applications for
True or False. Issue managers are responsible for the issue of shares right from the planning stage to the closing of all formalities related to the issue.
__________is the contract by each underwriter to sell a specified number of shares to the public.
The underwriting commission on debentures as per Companies Act 1956, should not exceed: (a). 5% of the issue price of debentures (b). 4% of the issue price of debentures (c). 2.5% of
As per SEBI guidelines, commission payable to underwriters for underwriting preference shares or debentures beyond Rs.5 lakhs, should not exceed: (a) 2% (c) 5% (b) 2.5% (d) 1.5%
The number of shares which are taken by each underwriter when the public has not subscribed is called as _________.
A Company issued 50,000 equity shares of ₹10 each at a premium of 10% and 2,000 debentures of ₹100 each at ₹95. Of the issue, 80% is underwritten by Sing & Co. at the maximum rate of
AB Ltd. issued 10,000 shares of ₹10 each. These shares were underwritten as follows:X: 3,000 shares; Y: 5,000 shares. The public applied for 7,000 shares, which included marked applications,
The underwriters’ liability is nil in case of __________ if the public has subscribed all the shares issued by the company.
X Ltd. issued 10,000 equity shares of ₹10 each. The issue was underwritten as follows: A: 30%; B: 30%; C: 20%:However, the company received applications for 8,000 shares only.
ABC Ltd. issued 30,000 shares of ₹100 each. The whole issue was underwritten by Gokul. In addition, there is a firm underwriting of 4,000 shares by Gokul. Applications for 20,000 shares were
Neeraj Ltd. issued 10,000 shares of ₹10 each, at a premium of 10%. The shares were underwritten by Joseph and Jaleel to the extent of 5,000 shares and 3,000 shares respectively.The total
Raja Ltd. issued 50,000 equity shares of ₹10 each. Of the issue, 70% was underwritten by Sarvan. In addition, there is a firm underwriting of 4,500 shares by marked application, totalled for 22,000
The following underwriting took place: A: 5,000 shares B: 3,000 shares C: 2,000 shares In addition, there was firm underwriting: A: 1,000 shares B: 500 shares C: 1,500
ABC Ltd. issued 30,000, 9% Preference shares of ₹10 each. Of the issue, 80% was underwritten by Palani. In addition, there is a firm underwriting of 5,000 shares by Palani. Applications for 27,000
Akbar Ltd. issued 1,00,000 equity shares of ₹10 each. Of the issue, 75% was underwritten by Kumar. In addition, there was a firm underwriting of 9,000 shares by Kumar. In all, applications for
True or False. A company cannot redeem its partly paid preference shares.
RKT Ltd. issued 40,000 equity shares of ₹10 each and 10,000 9% redeemable preference shares of ₹100 each being fully called and paid up on 31st March 2002. Profit and loss account showed
The balance sheet of Wallace Ltd., as on 31st December 2009 was as under:On this date, the preference shares were redeemed at par. Journalise and prepare balance sheet after redemption.
Redemption of 10,000 preference shares of ₹100 each was carried out of reserves and out of the issue of 4,000 shares of ₹100 each @ ₹95. What is the amount of capital redemption reserve account
What are Redeemable Preference Shares? How are such shares redeemed?
State the conditions and procedures for the Issue of Redeemable Preference Shares.
Redeemable preference shares can be redeemed out of:(a). Amount realized on sale of current assets (b). Profits prior to incorporation (c). Proceeds of fresh issue of shares (d). Both
When preference shares are redeemed out of the profits otherwise available for dividend, the sum equal to the nominal number of shares must be transferred to: (a). Capital redemption
True or False. The main purpose of creating capital redemption reserve is to maintain the capital structure of the company intact after redemption.
The summarised balance sheet of Gaur Ltd. on December 2004 was as follows:On the above date, the preference shares were redeemed at a premium of 10%. You are required to pass journal entries and give
A company having free reserves of ₹1,20,000 wants to redeem ₹4,00,000 preference shares. Calculate the face value of fresh issue of shares of ₹10 each to be made at a premium of 10%.
If ______ shares are issued for the purpose of redemption of preference shares, it will not be treated as increase of capital.
Briefly explain the meaning of ‘Proceeds of Fresh Issue of Shares’.
Capital redemption reserve is created:(a). Out of shares forfeited A/c (b). Out of profits available for dividend (c). Out of securities premium (d). Out of capital reserve.
True or False. The proceeds of fresh issue of debenture cannot be used for redemption of redeemable preference shares.
X co ltd has to redeem redeemable preference shares of the value of ₹2,00,000 at a premium of 10% for which the company has issued 10,000 equity shares of ₹10 each at a premium of 20. You are
The following is the balance sheet of Raj Ltd., as on 31st December 2009:The company resolved to redeem its preference shares at a premium of 20% out of profits. Pass the necessary journal entries
Manu Ltd. has 10% 10,000 preference shares of ₹10 each fully paid. The shares became due for redemption and the company decided to redeem the whole amount out of a fresh issue of equity shares of
If any premium is to be payable on redemption, such premium has to be provided out of the securities premium A/c or ____________.
Enumerate the profits, which are eligible to be transferred to Capital Redemption Reserve.
What are the profits, which cannot be transferred to Capital Redemption Reserve? State the reasons.
From the following data, calculate the amount of fresh issue of shares: Redeemable preference shares: Premium on redemption: Divisible profits available: General reserve balance: Securities premium
Amount can be transferred to capital redemption reserve from:(a). Capital reserve (b). Dividend equalization fund (c). Development rebate reserve (d). Securities premium A/c
True or False. Capital redemption reserve can be used to write off past losses of the company.
Companies (Amendment) Act 1988 prohibits issue of _________ preference shares.
A company wishes to redeem its preference shares amounting to ₹1,00,000 at a premium of 5% and for this purpose, issued 5,000 equity shares of ₹10 each at a premium of 5%. The company also has a
What do you mean by Capital Redemption Reserve?
How do you calculate the ‘Minimum Fresh Issue of Shares’? Illustrate with an example.
Amount cannot be transferred to capital redemption reserve A/c from:(a). Profit & Loss A/c (b). Debenture Redemption Fund (c). Workmen’s Accident Fund (d). Capital portion of
True or False. Workmen’s compensation fund can be transferred to capital redemption reserve A/c at the time of redemption of preference shares, if there is no liability for workmen for compensation.
Y Ltd. wishes to redeem its redeemable preference shares of ₹2,00,000 at a premium of 20%. For this purpose, it has decided to make a fresh issue of ₹100 shares at 10% premium and utilize the
Capital Profits are __________ to be transferred to capital redemption reserve A/c.
B Ltd. had issued 50,000 redeemable preference shares of ₹10 each, ₹8 paid. In order to redeem these shares, the company issued for cash 30,000 equity shares of ₹10 each, at a premium of ₹2
Can partly paid-up redeemable preference shares be redeemed? If not, why?
What are the steps to be followed to redeem the preference shares?
Capital redemption reserve A/c is used:(a). To write off past losses. (b). To issue fully paid bonus shares.(c). To declare dividends. (d). To Capital Reduction A/c.
A company issued ₹1,80,000 redeemable preference shares at par on 1st January 1988, redeemable at the option of the company on or after 31st December 1992 in whole or in part.The following
True or False. Capital redemption reserve can be used for converting partly paid shares into fully paid.
The following is the summarised balance sheet of a company as on 30th April 2001. It was decided to redeem both the classes of preference shares on 30th June at a premium of 5%. In May 2001, the
General Reserve is _________ to be transferred to capital redemption reserve A/c.
What do you mean by Bonus Issue?
How do you create Capital Redemption Reserve? How can it be utilised?
SJ Ltd. has part of their share capital in 3,000 8% redeemable preference shares of ₹100 each. The company decided to redeem the preference shares at premium of 10%. The general reserve of the
State the significance of ‘Minimum New Issue of shares’.
X Ltd. has issued 20,000 equity shares of ₹10 each at a premium of ₹2 for the redemption of preference shares. Which of the following amount would be considered as ‘proceeds of fresh
The following extract from the balance sheet of Vimala Ltd as on 31st December 1997 is given to you.The company exercises its option to redeem the preference shares on 1st January 2010. Share
True or False. Premium on issue of debentures can be used to pay premium on redemption of preference shares.
Profits which would otherwise be available for dividend is known as __________.
A company has 4,000 7% redeemable preference shares of ₹100 each, fully paid. The company decides to redeem the shares on 31st December 2004, at a premium of 5% .The company has sufficient profits
State the provisions of the Companies Act for Premium on Redemption of Preference Shares.
Redemption of preference shares does not affect:(a). Issued capital (b). Paid up capital (c). Authorised capital (d). Subscribed capital.
True or False. Redemption of preference shares can be considered as reduction of capital of the company.
The balance sheet of ABC & Co. Ltd. on 31st March 2009 stood as follows:Both the redeemable preference shares and debentures were due for redemption on 1st April 2009. The company arranged
Following is the balance sheet of Raja Ltd., as on 31st December 1998.On the above date, preference shares are redeemed to the extent possible at a premium of 5%. Journalise and give the amended
Balance sheet of X Ltd., as on 31st March 2007 is as follows. The preference shares are to be redeemed at 10% premium. Fresh issue of equity shares is to be made to the extent required under the
A company wants to redeem its 10,000 6% preference shares of ₹10 each, fully paid at 10% premium. The ledger accounts show the following balances:The directors redeemed the shares by making minimum
The balance sheet of Raman Ltd., as on 31st March 1987, is as follows:Redeemable preference shares were due for payment on 1st April 1987 at a premium of 10%. The company sent a reminder for the
The following balances were extracted from the books of S Ltd., as on 31st December 1992.The preference shares were redeemed on 1st January 1993 at a premium of ₹5 per share. The company issued
Following was the balance sheet of Brite Ltd., as on 31st December 1996.On this date, the company redeemed, at a premium of 5%, all of its preference shares and debentures. For this purpose, it sold
Following is the balance sheet of Manish Ltd., as on 31st December 2011.The preference shares were redeemed on 1st January 2012 at a premium of ₹2 per share, whereabouts of the holders of 1,200
The balance sheet of PQ Ltd. on 31st December 1985 is as under:The preference shares are to be redeemed at 10% premium along with dividend due for 1985. The company issued 45,000 equity shares of
The balance sheet of Suraj Ltd., as on 31st December 2011, was as under.The company passed the following resolutions on 1st January 2012. (a). To redeem the entire preference share capital at a
Following is the balance sheet of Nisha Ltd., as on 31st December 2011.On 1st January 2012, the company redeemed the preference shares at a premium of 10%. In order to pay-off the preference
True or False. Fully paid up preference shares can be redeemed.
A company issued 5,000 equity shares of ₹10 each at a discount of ₹1 per share payable as follows:₹2 on application ₹3 on allotment (excluding discount) ₹3 on 1st call and balance
Paid-up capital does not ________________.
What are the provisions of the Companies Act under section 78 for the use of shares premium?
10,000 equity shares of ₹20 each are issued for public subscription at a premium of 10%. The full amount is payable on application. Applications were received for 20,000 shares and pro rata
The amount in the Securities Premium can be used for: (a). Distribution of dividend (b). Writing of capital losses (c). Transferring to general reserve (d). Paying fees to
Satish Ltd. purchased land and buildings costing ₹5,00,000 and as payment towards purchase price, allotted equity shares of ₹10 each as fully paid. Pass journal entries in the books of Satish
On 1st April 2015, A Ltd. issued 50,000 shares of ₹100 each payable as follows: ₹20 on application.By 20th May, 40,000 shares were applied for and all applications were accepted. Allotment was
True False. Dividend is declared and paid on the called-up capital.
State the legal provisions relating to allotment of shares?
Discount on issue of shares is a: (a). Capital loss (b). Revenue loss (c). Deferred revenue expenditure (d). Neither of the above.
A limited company having a pai-up capital of ₹5,00,000 in shares of ₹10 each had a Reserve of ₹1,20,000. It was resolved to capitalize ₹1,00,000 of the Reserve by issuing 10,000 fully paid
What are Calls-in-Arrears? Explain the accounting treatment for Calls-in-Arrears.
True False. A company cannot ‘buy back’ partly paid up shares.
The name of the company are given in the ______ of the association.
6% is the rate of interest: (a). Calls in arrear (b). Calls in advance (c). Discount on issue of shares (d). Share allotment
True False. Equity Shareholders get dividend at fixed rate.
Define a share. What are the different kinds of shares that can be issued by a company?
Shareholders are called as __________ of the company.

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