Accounting for share Capital Test

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Accounting for share Capital Test - 16

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Question 1
1 / -0

X Ltd. forfeited 10 shares of Rs 10 each issued at a discount of 10% to Y on which a second & financial call of Rs 4 was not yet called and a first call of Rs 4 was not received. 8 of these shares were reissued as Rs 8 called up for Rs 7.50 per share. On reissue, the Share Capital will be ____________.

A
Debited with Rs 48

B
Credited with Rs 48

C
Debited with Rs 60

D
Credited with Rs 64

Solution

The share capital is credited when the shares are reissued by the company.
$$Share\quad Capital\quad Amount=Shares\quad reissued\times Reissue\quad value $$
Substitute values in the above equations
$$Share\quad Capital\quad Amount\quad = 8shares \times Rs8=Rs64$$.
Question 2
1 / -0

Y Ltd. forfeited 50 shares of Rs 100 each issued at 10% premium on which allotment money of Rs 30 per share (including premium) and first call of Rs 30 per share were not received and the second and final call of Rs 20 per share was not yet called. 20 of these shares as Rs 80 paid up for Rs 70 per share.
On re-issue, the Share Capital Account will be ___________________.

A
Debited with Rs 1,600

B
Credited with Rs 1,600

C
Debited with Rs 4,000

D
Credited with Rs 1400

Solution

When shares are reissued the share capital is credited with a certain amount
$$Share\quad Capital\quad Amount\quad on\quad reissue\quad =\quad No.\quad of\quad shares\quad reissued\quad \times \quad reissue\quad price$$
Substitute the values in above equation
$$Share\quad Capital\quad Amount\quad on\quad reissue=20shares \times Rs80= Rs1,600$$.
Question 3
1 / -0

The interest on calls-in-advance is paid for the period from the _________.

A
Date of receipt of application money to the date of appropriation

B
Date of receipt of allotment money to the date of appropriation

C
Dale of receipt of advance to the date of appropriation

D
Date of appropriation to the date of dividend payment

Solution

Calls in Advance is the amount paid by shareholder before the due date.
The company provides interest on this amount to the shareholder.
The interest is paid on call in advance starting from the date when advance is recieved to the date when the amount has to be appropriated or recieved.
Thus, the interest on call in advance is pai for period from date of reciept to the date of appropriation.
Question 4
1 / -0

Which of the following statements is false?

A
The forfeited shares should not be issued at a premium.

B
At the time of forfeiture of shares, securities premium should not be debited with the amount of premium already received.

C
Shares can be issued at a discount only after one year from the commencement of business

D
Securities premium cannot be utilized to redeem preference shares

Solution

The option B is true statement because when the shares are forfeited the premium which has already been received cannot be debited as this amount has already been paid by shareholders and cannot be debited for the purpose of receiving the amount in future.
The option C is also correct because a newly open business cannot issue shares at discount. If this happens company might be in loss and may lose the opportunity for a goodwill.
The option D is also the correct one as security premium is used by many companies to redeem their preference shares in case of shortage of funds.
Hence, the option A is false because forfeited shares can be reissued at premium if the company needs funds in its reserves.
Question 5
1 / -0

Which of the following statements is false?

A
Shares can be issued for cash or any other consideration.

B
In the event of over subscription, excess amount has to be refunded or a pro rata allotment is to be made.

C
SEBI guidelines are applicable not only for the first issue of shares but also to subsequent issue of shares

D
The share application money is automatically converted to share capital

Solution

The option D is the false amongst the all beacuse share application money is directly not converted to share capital as there may arise a case when application money has to be withdrawn.
The option A is true because shares can be issued by a company for both cash as well as for any considertaion like underwriter services, purchase of assets or a business and payment to promoters.
The option B is also a true statement because in the case of oversubsccription the excess amount recieved either has to be redunded or adjusted as per pro-rata allotment.
The option C is a correct statement too because $$SEBI$$ has issued guideline not only for the first issue of shares but also for regular issue of shares by the company.
Question 6
1 / -0

Which of the following statements is true?

A
Par value must be separately reported in the balance sheet because it represents the market value of the shares when it was first issued

B
Selling common shares for more than par value results in gain that is reported in the income statement

C
Common shareholders assume a higher investment risk than long-term creditors

D
Non-convertible debentures cannot be issued by companies

Solution

The option A is not a true statement as the accountants record the par value of shares only in the balance sheet. This is because market value keeps on fluctuating and thus balance sheet can be drawn year after year.
The option B is also a false statement as the profit earned on selling shares more than the par value is recorded under the capital reserve under the balance sheet.
The option C is a true statement because common shareholder have risk of non-return of capital at the time of winding up of company but the long term creditors are returned their investments on winding up. Hence, they have a high investment risk.
The option D is an incorrect statement as a company is free to issue any kind of security like the non-convertible debentures.
Question 7
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Directions For Questions

CAS Ltd. was registered with a share capital of Rs 2,00,00,000 divided into equity shares of Rs 10 each. It offered 9,00,000 equity shares to the general public at par payable as to Rs 3 on application, Rs 3 on allotment and balance in 2 equal calls. The public had subscribed for 17,00,000 shares. Till $$31^{st}$$ March only first call had been made. All the shareholders had paid up except Mr. C, a holder of 50,000 shares, who did not pay the call money.
Using the above information, answer the questions:

...view full instructions

How much is Paid up Capital?

A
Rs 2,00,00,000

B
Rs 1,80,00,000

C
Rs 1,70,00,000

D
Rs 71,00,000

Solution

Paid up capital is total money paid by all the shareholders after deducting all the all those amount which are not paid after being called up.
$$Subscribed\quad Share\quad Capital = Shares\quad offered \times called\quad up\quad value$$
Substitute the values in above equation
$$Subscribed\quad Share\quad Capital = 9,00,000 \times 8 = Rs 72,00,00$$
$$Money\quad not\quad paid = No.\quad of\quad shares \times Amount\quad per\quad share$$
Substitute the values in above equation
$$Money\quad not\quad paid = 50,000 \times 2 = Rs 1,00,000$$
$$Paid\quad up\quad capital =Subscribed\quad capital - Money\quad not\quad paid$$
Substitute the values in above equation
$$Paid\quad up\quad capital = Rs 72,00,000 - Rs 1,00,000 = Rs71,00,000$$.
Question 8
1 / -0

In the absence of partnership agreement, interest on drawings of a partners is charged :

A
At $$6\%$$ per annum

B
At $$9\%$$ per annum

C
At $$12\%$$ per annum

D
No interest is charged

Solution

In the absence of partnership agreement, no interest on drawings is charged from any partners.
Hence, the correct answer is option (iv).
Question 9
1 / -0

Preference shareholders are ______ of the company.

A
creditors

B
owners

C
customers

D
borrowers

Solution

Like the ordinary or equity shareholders, preference shareholders are also owners of the company. The only difference is that preference shareholders have the dividend rights before the equity shareholders.
Question 10
1 / -0

Public limited companies cannot issue __________.

A
Equity shares

B
Deferred shares

C
Preference shares

D
Right Share

Solution

Deferred shares are those shares that does not have any rights to the assets of the company undergoing bankruptcy until equity and preference shares are paid off. Public limited company's are not allowed to issue such shares.

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Accounting for share Capital Test - 16

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Accounting for share Capital Test - 16

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SHARING IS CARING

Question 1

Debited with Rs 48

Credited with Rs 48

Debited with Rs 60

Credited with Rs 64

Solution

Question 2

Debited with Rs 1,600

Credited with Rs 1,600

Debited with Rs 4,000

Credited with Rs 1400

Solution

Question 3

Date of receipt of application money to the date of appropriation

Date of receipt of allotment money to the date of appropriation

Dale of receipt of advance to the date of appropriation

Date of appropriation to the date of dividend payment

Solution

Question 4

The forfeited shares should not be issued at a premium.

At the time of forfeiture of shares, securities premium should not be debited with the amount of premium already received.

Shares can be issued at a discount only after one year from the commencement of business

Securities premium cannot be utilized to redeem preference shares

Solution

Question 5

Shares can be issued for cash or any other consideration.

In the event of over subscription, excess amount has to be refunded or a pro rata allotment is to be made.

SEBI guidelines are applicable not only for the first issue of shares but also to subsequent issue of shares

The share application money is automatically converted to share capital

Solution

Question 6

Par value must be separately reported in the balance sheet because it represents the market value of the shares when it was first issued

Selling common shares for more than par value results in gain that is reported in the income statement

Common shareholders assume a higher investment risk than long-term creditors

Non-convertible debentures cannot be issued by companies

Solution

Question 7

Rs 2,00,00,000

Rs 1,80,00,000

Rs 1,70,00,000

Rs 71,00,000

Solution

Question 8

At $$6\%$$ per annum

At $$9\%$$ per annum

At $$12\%$$ per annum

No interest is charged

Solution

Question 9

creditors

owners

customers

borrowers

Solution

Question 10

Equity shares

Deferred shares

Preference shares

Right Share

Solution

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