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Accounting for share Capital Test - 66

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Accounting for share Capital Test - 66
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Weekly Quiz Competition
  • Question 1
    1 / -0
    Reserve capital is ______.
    Solution
    Reserve Capital - A company may reserve a portion of its uncalled capital to be called only in the event of winding up of the company. Such uncalled amount is called 'Reserve Capital' of the company. It is available only for the creditors on winding up of the company.
  • Question 2
    1 / -0
    Forfeited shares, when re-issued, cannot be issued at a discount more than __________.
    Solution

    Forfeited shares can be reissued as fully paid at a par, premium or discount. In this, it may be noted that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue.

  • Question 3
    1 / -0
    STU Ltd. invited application for issue of $$100,000$$ shares of $$Rs. 10$$ each at a premium of $$Rs. 2, Rs. 5$$ called at the time of application, $$Rs. 5$$ (including premium) at the time of allotment and balance $$Rs. 2$$ at the time of $$1st$$ call. Applications were received for $$1,30,000$$ shares. Application money was returned to the extent to $$10,000$$ shares and pro rata allotment was made to the remaining applicants of $$120,000$$. PQR to whom $$500$$ shares were allotted failed to pay allotment and calls money. Similarly ABC to whom $$400$$ shares were allotted failed to pay first and final call. All the $$900$$ shares were subsequently forfeited. These shares were subsequently re-issued at $$Rs. 8$$ fully paid. Based on the above facts, on re-issue of all the $$900$$ forfeited shares the balance in Forfeiture all the $$900$$ forfeited shares the balance in Forfeiture A/c is ________.
  • Question 4
    1 / -0
    A company cannot declare dividend to its shareholder, if it ....
  • Question 5
    1 / -0
    A company forfeited $$2,000$$ shares of Rs. $$10$$ each $$9$$ which, were issued at par) held by A for non-payment of allotment money of Rs. $$4$$ per share. The called up value per share was Rs. $$9$$. On forfeiture, the amount debited to share capital is?
    Solution
    In case of non- payment of any of the call money, the shares get forfeited. Later these shares can be sold at the called up value. 
    On issue of forfeited shares, the share capital account is debited with the called up value i.e 18,000 (2000*9).
       
  • Question 6
    1 / -0
    The directors of a company forfeited $$1000$$ shares of Rs. $$10$$ each, Rs. $$7.50$$ paid up, for non payment of final call money of Rs. $$2.50$$ per share. $$700$$ of these shares are reissued $$@$$ Rs. $$7/-$$ per share. The amount transferred to capital reserve A/c would be__________.
    Solution
    Equity share final call A/c Dr.  2500
        To Equity share capital                   2500
    (Being final call due)

    Equity share capital A/c Dr.  10,000
          To calls in arrear                          2500
          To share forfeiture                       7500
    (being shares forfeited)

    Bank A/c                    Dr  4900
    Share Forfeiture A/c Dr   2100
        To Equity share capital                7000
    (Being 700 shares re-issued)

    Share forfeiture A/c   3150
         To Capital Reserve          3150
    (Being balance on 700 shares in share forfeiture account transferred to capital reserve)

    Notes:- Balance in share forfeiture A/c    =    7500
                  Amount for 700 shares =   7500/1000*700 = 5250
                  Less: Amount Utilised   =                                  (2100)
                Balance left                                                          3150
  • Question 7
    1 / -0
    'A' Ltd acquires 'B' Ltd and agrees to issue 3 shares of Rs. 10 each, Rs. 9 paid up and the market value of Rs.15 per share for every 5 shares in 'B' Ltd. If B Ltd has 100000 shares of Rs.10 each, Rs.5 paid up and market value Rs 8 per shares therefore, the amount of purchase consideration is _______________.
    Solution
    Calculation: 
    Step 1: $$1,00,000$$ X $$3$$ X Rs.$$15$$=$$45,00,000$$
    Step 2: Step 1 divide by 5= Rs.$$9,00,000$$
    Note: Market value of shares has been considered to calculate the purchase consideration.
  • Question 8
    1 / -0
    Dabur Ltd. forfeited 400 shares of Rs. 1 G each fully called up on which the holder has paid only application money at Rs. 4 per share. Out of these 250 shams were re issued at ',' 2 per share fully paid up. Capital reserve will be credited by:
  • Question 9
    1 / -0
    Solid ltd. issued 2,000, 10% preference shares of Rs. 100 each at par, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 equity shares of Rs. 100 each at a premium of 20% per share. At the time of redemption of preference shares, the amount to be transferred by the company to the Capital Redemption Reserve Account will be-
    Solution
    In case fresh shares are issued at premium then in such case only nominal value of the share will be transferred to C.R.R. Account and premium will be transferred to "Securities Premium Account". 
    Amount to be transferred to Capital Redemption Reserve:
    Face value of shares redeemed (2,000 X 100)                          = 2,00,000
    Less: Proceeds from new issue (1,500 X 100)                           = 1,50,000
                                                                                                             50,000
  • Question 10
    1 / -0
    If vendors are issued fully paid shares of Rs. 80,000 in consideration of net assets of Rs. 60,000, then the balance of Rs. 20,000 will be __________.
    Solution
    Purchase consideration can be paid off either by cash or issue of shares. 

    If the purchase consideration is more than the net assets worth, the difference amount will be considered as payment of goodwill. 
    If the purchase consideration is lower than the net assets worth, the difference amount will be considered as capital reserves. 
    Here:
    Purchase Consideration                                   Rs.80000
    Net Assets worth                                              Rs.60000
    Balance to be paid against goodwill               Rs.20000


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