ILLUSTRATION 8. A Company wants to redeem its 20,000, 12% Preference Shares of 10 each at 10% premium. Foilowing balances are obtained from their books :- ₹ Securities Premium 6,000 Balance of Surplus Account 30,000 Directors redeemed the shares by making minimum fresh issue of equity shares of U10 each at 5% premium. Give necessary journal entries.

ILLUSTRATION 8. A Company wants to redeem its 20,000, 12% Preference S

1.	ILLUSTRATION 8. A Company wants to redeem its 20,000, 12% Preference Shares of 10 each at 10% premium. Foilowing balances are obtained from their books :- ₹ Securities Premium 6,000 Balance of Surplus Account 30,000 Directors redeemed the shares by making minimum fresh issue of equity shares of U10 each at 5% premium. Give necessary journal entries.
Answer» Explanation:Correct option isAs 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)= 2,20,000Amount of fresh issue = Amount to be paid on redemption - (Free reserves + securities premiumreserve)= 2,20,000 - (30,000+ 20,000 +8,000 + 50,000) = Rs-1,12,000.ANSWER verified by TopprUpvote (14)5769 ViewsWas this answer HELPFUL?D Rs. 1,12,000

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