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Accounting for share Capital Test - 27

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Accounting for share Capital Test - 27
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  • Question 1
    1 / -0
    X limited issued 10,000 equity shares of Rs.10 each at premium Rs.2 each. The company has incurred issue expenses of Rs.5,000. The equity shareholders expect dividend of $$18\%$$ then cost of capital is ____________.
    Solution
    K$$_e$$ = $$\frac{D_1}{NP}$$
    Where NP i.(E) Net Proceed of shares = $$\frac{1000 X12 - 5000}{10000}$$
    Dividend of a share (D$$_I$$) = Rs. 1.8.
    Hence option (B) is the correct answer.
  • Question 2
    1 / -0
    Which of the following feature(s) of preference shares are similar to those of equity shares?
    Solution
    Like in the case of equity shareholders there is no obligatory payment to the preference shareholders and the preference dividend is not tax deductible.
    Hence, option (B) is the correct answer.
  • Question 3
    1 / -0
    If the stock velocity is 6, cost of goods sold is Rs.54,000 and closing stock is Rs.10,000 the opening stock is __________.
    Solution
    Let the opening stock is x.
    Stock velocity = cost of goods sold / average inventory
    6 = 54,000/(10000+x)/2
    hence x = Rs.8,000.
  • Question 4
    1 / -0
    Securities Premium Account is shown on the liabilities side of the company's balance sheet under the heading ________.
    Solution
    It is quite common for the shares of financially strong and well-managed companies to be issued at premium, i.e. at an amount more than the nominal or par value of shares.
    Thus, when a share of the nominal value of Rs. 100 is issued at Rs. 105, it is said to have been issued at a premium of 5 percent. 
    When the issue of shares is at premium, the amount of premium may technically be called at any stage of the issue of shares. 

    However, premium is generally called with the amount due on allotment, sometimes with the application money and rarely with the call money. The premium amount is credited to a separate account called 'Securities Premium Account' and Is shown on the liabilities side of the company's balance sheet under the heading 'Reserve and Surplus'.
  • Question 5
    1 / -0
    The _________ can either cancel or re-issue the forfeited shares.
    Solution
    The directors can either cancel or reissue the forfeited shares. In most cases, however, they reissue special shares which may be at par, at premium or at a discount. Normally, the forfeited shares are reissued as fully paid and at a discount. It may be noted that the amount of discount allowed cannot exceed  the amount that had been received on forfeited shares on their original issue.
  • Question 6
    1 / -0
    The balance of share forfeited account after the reissue of forfeited shares is transferred to ________________.
    Solution
    Normally, the forfeited shares are reissued as fully paid and at a discount. The amount of discount allowed cannot exceed the amount that had been received on forfeited shares on their original issue, and should be debited to the 'Share Forfeited A/c'. The balance, if any, left in Share Forfeited A/c, in respect of shares reissued , should be treated as capital profit and  transferred to Capital Reserve A/c.
  • Question 7
    1 / -0
    Return of shares voluntarily by a shareholder to the company for cancellation is called _________________.
  • Question 8
    1 / -0
    The term equity share is defined in section ______ of the Company Act, $$2013$$.
  • Question 9
    1 / -0
    Advantages of a corporate form of business organization includes _________.
  • Question 10
    1 / -0
    The term equity share means a share __________.
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