02 November 2013
Below is a item from Balance sheet of Srabanti Company limited Liabilities Rs Issued and Subscribed Capital: 5000, 7.5% Redeemable Pref.Shares 5,00,000 of Rs100 each
Assets Rs Investments, at cost 3,00,000 (Market Value Rs2,80,000)
Given:On 1.1.1996,To finance the redemption,all the investments were sold at Market Price.
In the above context: Q1)How investment transaction helps for Redemption of Preference shares? While solving problems I have not seen any cash which got due to sale of investment is utilized for payment of Preference shares.
02 November 2013
what you mean by "I have not seen any cash". It has been provided that investments were disposed of at market price. ie Rs 2.8 lakhs will come from the sale of investment. Rest needs to be taken out of from whatever cash you already had.
Cash/Bank Dr Rs 2.8 lakhs
To Investments Rs 2.8 lakhs (Being investments sold)
02 November 2013
what you mean by "I have not seen any cash". It has been provided that investments were disposed of at market price. ie Rs 2.8 lakhs will come from the sale of investment. Rest needs to be taken out of from whatever cash you already had.
Cash/Bank Dr Rs 2.8 lakhs
To Investments Rs 2.8 lakhs (Being investments sold)
18 November 2013
it is correct statement. Refer proviso (a) to section 80 of the companies act 1956. redeemable preference shares can be redeemed only out of distributable profit.
CAclubindia
