2. The ledger accounts of M Ltd. show the following balances: Rs.

14% Preference share Capital 3,00,000
Securities Premium 20,000
Investment Allowance Reserve 50,000
General Reserve 80,000
Profit and Loss Account 38,600
The company redeems preference shares at a premium of 10% by issue of equity shares of Rs. 10 each at a premium of 20%. Fresh issue of shares is made in multiples of 100 shares for such amount as is necessary after utilizing the available sources to the maximum extent.
Calculate the number of fresh shares issued and the amount transferred to capital redemption reserve account.

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The ledger accounts of M Ltd. show the following balances: Rs.

14% Preference share Capital 3,00,000
Securities Premium 20,000
Investment Allowance Reserve 50,000
General Reserve 80,000
Profit and Loss Account 38,600
The company redeems preference shares at a premium of 10% by issue of equity shares of Rs. 10 each at a premium of 20%. Fresh issue of shares is made in multiples of 100 shares for such amount as is necessary after utilizing the available sources to the maximum extent.
Calculate the number of fresh shares issued and the amount transferred to capital redemption reserve account

To calculate the number of fresh shares issued and the amount transferred to the capital redemption reserve account, we need to follow these steps:

Step 1: Find the total amount available for redemption:
Preference share capital: Rs. 3,00,000
Add: Securities Premium: Rs. 20,000
Add: Investment Allowance Reserve: Rs. 50,000
Total amount available for redemption: Rs. 3,70,000

Step 2: Calculate the premium on redemption:
Premium on redemption = Total amount available for redemption * Premium rate
Premium rate = 10%
Premium on redemption = Rs. 3,70,000 * 10% = Rs. 37,000

Step 3: Calculate the face value of preference shares to be redeemed:
Face value of the preference shares to be redeemed = Total amount available for redemption - Premium on redemption
Face value of the preference shares to be redeemed = Rs. 3,70,000 - Rs. 37,000 = Rs. 3,33,000

Step 4: Calculate the number of preference shares to be redeemed:
Number of preference shares to be redeemed = Face value of preference shares to be redeemed / Face value per share
Face value per share = Rs. 10
Number of preference shares to be redeemed = Rs. 3,33,000 / Rs. 10 = 33,300 shares

Step 5: Calculate the number of new equity shares to be issued:
Number of new equity shares to be issued = Number of preference shares to be redeemed / Conversion ratio
Conversion ratio = Premium on equity shares / Premium on redemption
Premium on equity shares = 20%
Premium on redemption = 10%
Conversion ratio = 20% / 10% = 2

Number of new equity shares to be issued = 33,300 shares / 2 = 16,650 shares

Step 6: Calculate the amount transferred to the capital redemption reserve account:
Amount transferred to capital redemption reserve account = Number of new equity shares * Face value per share + Premium on equity shares * Number of new equity shares
Face value per share = Rs. 10
Premium on equity shares = 20%

Amount transferred to capital redemption reserve account = 16,650 shares * Rs. 10 + 20% * 16,650 shares * Rs. 10
Amount transferred to capital redemption reserve account = 1,66,500 + 3,33,000 = Rs. 4,99,500

Therefore, the number of fresh shares issued is 16,650 shares, and the amount transferred to the capital redemption reserve account is Rs. 4,99,500.

To calculate the number of fresh shares issued and the amount transferred to the capital redemption reserve account, we need to follow these steps:

1. Calculate the total value of the preference shares to be redeemed. This can be done by multiplying the number of preference shares (3,00,000) by their face value (Rs. 100).

Value of preference shares = 3,00,000 * 100 = Rs. 3,00,00,000

2. Calculate the premium on the redemption of the preference shares. This can be done by multiplying the total value of the preference shares (Rs. 3,00,00,000) by the redemption premium percentage (10%).

Redemption premium = 3,00,00,000 * 10% = Rs. 30,00,000

3. Calculate the total amount available for redemption. This can be calculated by adding the securities premium (Rs. 20,000), investment allowance reserve (Rs. 50,000), general reserve (Rs. 80,000), and profit and loss account balance (Rs. 38,600).

Total amount available for redemption = 20,000 + 50,000 + 80,000 + 38,600 = Rs. 1,88,600

4. Calculate the remaining amount needed for redemption. This is the total value of the preference shares minus the total amount available for redemption.

Remaining amount for redemption = 3,00,00,000 - 1,88,600 = Rs. 2,99,11,400

5. Calculate the number of equity shares to be issued. This can be done by dividing the remaining amount needed for redemption (Rs. 2,99,11,400) by the issue price per share (the face value of the equity shares plus the premium).

Issue price per share = Rs. 10 + 20% of Rs. 10 = Rs. 10 + 2 = Rs. 12

Number of equity shares to be issued = 2,99,11,400 / 12 = 24,92,616.67

Since shares are issued in multiples of 100, the actual number of shares issued will be rounded off to the nearest whole number, which is 24,92,617.

6. Calculate the amount transferred to the capital redemption reserve account. This can be done by multiplying the number of equity shares issued (24,92,617) by the face value per share (Rs. 10).

Amount transferred to capital redemption reserve account = 24,92,617 * 10 = Rs. 2,49,26,170