Accounting for share Capital Test

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Accounting for share Capital Test - 52

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Weekly Quiz Competition

Question 1
1 / -0

Convertible Preference share is one which carries _____________________.

A
A right to receive arrears of dividend

B
A rights to participate in the surplus profits and surplus assets

C
A right to participate in the surplus profits or surplus assets or both

D
A right of conversion into equity share

Solution

Convertible preferred shares can be sold on the secondary market and the market price and behavior is determined by the coversion premium wh shown in the example above, the value of the converted preferred share is equal to the market price of common shares multiplied by the conversion ratio.
Question 2
1 / -0

The balance of Securities Premium Account can be utilized _______________________.

A
To issue fully paid bonus shares to creditors.

B
To write off development expenditure.

C
To provide for the premium payable on the buy-back of equity shares.

D
None of the above

Solution

The account can only be used for such specific purposes and no other purpose. To issue fully paid-up bonus shares to its existing shareholders. The balance canalso be used to provide for the premium that is payable on the redemption of debentures or of preference shares of the company.
Question 3
1 / -0

Unless otherwise stated, the preference shares are deemed to be _________________.

A
Non-cumulative, Non-participating and Non-convertible.

B
Cumulative, Non-participating and Convertible.

C
Cumulative, Participating and Non-convertible

D
None of the above

Solution

Unless and otherwise stated , preference share is always presumed to be Cumulative, non-participating and non-convertible.
Question 4
1 / -0

As per Sec. 69 (3) of the Companies Act, 1956, the amount payable on application on each share must be at least ______________________.

A
5% of the nominal amount of share

B
25% of the nominal amount of share

C
25% of the called amount of share

D
5% of the called amount of share.

Solution

The amount payable on application on every security shall not be less than five percent of the nominal amount of the security or such other percentage or amount as may be whenever a company having a share capital a share capital makes any allotment of in case of any default under sub -section or sub-section.
Question 5
1 / -0

Prospectus of a company is __________________.

A
An application for shares/debentures

B
An offer by the company to the public to sell its shares or debentures

C
Cumulative, Participating and Non-convertible

D
None of the above

Solution

Cumulative: Most preferred stock is cumulative meaning that if the company withholds part, or all, of the expected dividends, these are considered dividends in arrears and must be paid before any other dividends.
Participating: Preferred stock has a fixed dividend rate. If the company issues participating preferreds, those stocks gain the potential to earn more than their stated rate. The exact formula for participation will be found in the prospectus.
Non convertible : Non convertible preference share means the share will not be converted into equity shares, but will be redeemed as preference share only. The 7.5% means the company will pay a fixed return of 7.5 % on the face value of the. preference share.
Question 6
1 / -0

As per Table A, the amount of call on a share must not exceed _____________________.

A
5% of the nominal amount of share

B
25% of the nominal amount of share

C
25% of the called amount of share

D
5% of the called amount of share

Solution

The call on shares should not exceed one-fourth(25%) of the nominal value of the share. It should be made only after one month has expired from the previous call date. Shareholders belonging to a single class should be asked to make payment on the uniform basis.
Question 7
1 / -0

As per SEBI Guidelines, the amount payable on application on each share must be at least-

A
5% of the nominal amount of share

B
25% of the nominal amount of share

C
25% of the called amount of share

D
5% of the called amount of share
Question 8
1 / -0

The directors of CAS Ltd. made the final call of Rs 30 per share on May 15 indicating the last date of payment of call money to be May 31. Mr. X, holding 10,000 shares paid the call money on July 15.
If the company adopts Table A, the amount of interest on calls-in-arrear to be paid by
Mr. X is ____________.

A
Rs 1,250

B
Rs 1,875

C
Rs 1,500

D
Rs 2,250

Solution

Interest on calls-in-arrears is the interest paid by the shareholder to a company when the money on calls or allotment has been paid after the due date.
According to Table A, the interest to be charged on calls-in-arrears is 5%
$$Interest\quad on\quad call-in-arrear = Amount\quad on\quad arrear \times interest\quad rate \times time\quad period$$
Substitute the values in above equation
$$Interest\quad on\quad call-in-arrear = 3,00,000 \times \cfrac { 5 }{ 100 } \quad \times \cfrac { 1.5 }{ 12 } months = \cfrac { 22,50,000 }{ 1200 }= Rs\quad 1,875$$
Hence the interest charged is Rs $$1,875$$.
Question 9
1 / -0

A company invited applications for 25,000 equity shares of Rs 10 each and received 30,000 applications along with the application money of Rs 4 per share. Which of the following alternatives can be followed?
I. Refund the excess applications.
II. Make pro rata allotment to all the applicants, and refund the excess application money.
III. Not to allot any shares to some applicants, full allotment to some of the applicants and pro rata allotment to the rest of the applicants.
IV. Not to allot any shares to some applicants and make pro rate allotment to other applicants.
V. Make pro rata allotment to all the applicants and adjust the excess money received towards call money.

A
Only (II) above

B
Both (I) and (IV) above

C
All (I), (II), (Ill), (IV) and (V) above

D
Only (III) above

Solution

Oversubscription is the case when a company receives application more than the issued shares.
These extra 5000 shares can be treated in the following ways:
1. The company may refund the amount received on these 5000 excess shares.
2. Prorata allotment can be made in which the shares can be re-adjusted as per the conditions.
3. The company can resolve the problem be rejecting some of the shares, full allotment to some shares and making pro-rata allotment to the rest of the shares.
4. Reject some of the shares and make pro-rata allotment to rest of the shares.
5. The company can even make pro-rata allotment to all shares and the excess money can be used in fulfilling the calls money.
Question 10
1 / -0

If shares are forfeited, share capital account is debited with _________________.

A
the face value of shares.

B
the called up value of shares.

C
the paid up value of shares.

D
None of the above

Solution

The company debits the Share Capital Account with the amount called-up up to the date of forfeiture on shares. It credits the Shares Allotment Amount or Shares Call Account with amount called-up on forfeited shares but due from the shareholders.

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Accounting for share Capital Test - 52

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Accounting for share Capital Test - 52

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Question 1

A right to receive arrears of dividend

A rights to participate in the surplus profits and surplus assets

A right to participate in the surplus profits or surplus assets or both

A right of conversion into equity share

Solution

Question 2

To issue fully paid bonus shares to creditors.

To write off development expenditure.

To provide for the premium payable on the buy-back of equity shares.

None of the above

Solution

Question 3

Non-cumulative, Non-participating and Non-convertible.

Cumulative, Non-participating and Convertible.

Cumulative, Participating and Non-convertible

None of the above

Solution

Question 4

5% of the nominal amount of share

25% of the nominal amount of share

25% of the called amount of share

5% of the called amount of share.

Solution

Question 5

An application for shares/debentures

An offer by the company to the public to sell its shares or debentures

Cumulative, Participating and Non-convertible

None of the above

Solution

Question 6

5% of the nominal amount of share

25% of the nominal amount of share

25% of the called amount of share

5% of the called amount of share

Solution

Question 7

5% of the nominal amount of share

25% of the nominal amount of share

25% of the called amount of share

5% of the called amount of share

Question 8

Rs 1,250

Rs 1,875

Rs 1,500

Rs 2,250

Solution

Question 9

Only (II) above

Both (I) and (IV) above

All (I), (II), (Ill), (IV) and (V) above

Only (III) above

Solution

Question 10

the face value of shares.

the called up value of shares.

the paid up value of shares.

None of the above

Solution

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