Sample Multiple Choice Questions (MCQ's) for CA Intermediate - Paper 1 - ACCOUNTING Chapter 7: REDEMPTION OF PREFERENCE SHARES - For Practice relevant for May/November 23 Examinations


Q1.  Securities premium cannot be used to _______.

  1. Issue bonus shares  
  2. Redeem preference shares
  3. Write-off preliminary expenses 

Answer: 2


Q2.  S Ltd. issued 2,000, 10% Preference shares of ₹ 100 each at par on 1.4.20X1, which are redeemable at a premium of 10%. For the purpose of redemption, the company issued 1,500 Equity Shares of  ₹ 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 = ?

  1. ₹ 50,000
  2. ₹ 40,000
  3. ₹ 2,00,000

Answer: 1

Q3.  Which of the following can be utilized for redemption of preference shares?

  1. The proceeds of fresh issue of equity shares
  2. The proceeds of issue of debentures
  3. The proceeds of issue of fixed deposit 

Answer: 1

Q4.  Which of the following statements is True?

  1. Capital redemption reserve cannot be used for writing off miscellaneous expenses and losses
  2. Capital profit realized in cash cannot be used for payment of dividend
  3. Reserves created by revaluation of fixed assets are not permitted to be capitalized

Answer: 1

Q5.  A company who prepares financial statements in compliance with Accounting Standards under Section 133 of the Companies Act, 2013, it cannot utilize securities premium for the purpose of

  1. Purchase of its own shares or other securities
  2. To write off discount allowed on any of securities or debentures of the company
  3. To provide for premium on the redemption of Redeemable Preference shares of the Company. 

Answer: 3

Q6.  When shares are redeemed by utilising distributable profit, an amount equal to the face value of shares redeemed is transferred to _______________________ account by debiting the distributable profit.

  1. Capital replacement Reserve.
  2. Capital Redemption Reserve. 
  3. Capital Reserve. 

Answer: 2


CA Intermediate ACCOUNTING - MCQ for Chapter 8 -   

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