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Redeemable preference shares of Rs. 2,00,000 are to be redeemed at par for which fresh equity shares of Rs. 80,000 are issued at a discount of 10%. What amount should be transferred to Capital Redemption Reserve Account?

Redeemable preference shares of Rs. 2,00,000 are to be redeemed at par for which fresh equity shares of Rs. 80,000 are issued at a discount of 10%. What amount should be transferred to Capital Redemption Reserve Account? Correct Answer Rs. 1,28,000

Transfer To Capital Redemption Reserve Account = Preference shares redemption amount – Fresh equity shares amount 

= 200000 - (80000 - 8000)

= 200000 - 7200

= Rs. 1,28,000. 

Therefore, if Redeemable preference shares of Rs. 2,00,000 are to be redeemed at par for which fresh equity shares of Rs. 80,000 are issued at a discount of 10% the amount to be transferred to Capital Redemption Reserve Account will be Rs. 1,28,000.

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