Issue of shares MCQ Test - 4

Those preference shares which do not carry the right to receive arrears of dividend :

• (A) Non-participating Preference Shares

• (B) Irredeemable Preference Shares

• (C) Non-convertible Preference Shares

• (D) Non-cumulative Preference Shares

Answer explanation

Explanation:

1. The non-cumulative preference shares are the shares which do not carry the right to receive arrears of dividend.

Non-participating Preference Shares are the shares which do not have a share in surplus profits and on which only a fixed rate of dividend is paid.

Non-convertible Preference Shares are the preference shares which don’t have the right to be converted into equity shares.

Preference shares which don't have any maturity date are called irredeemable preference shares

Which of the following is not a purpose for which the Securities Premium amount can be used ?

• (A) Issuing fully paid bonus shares to shareholders

• (B) Issuing partly paid up bonus shares to shareholders

• (C) Writing off preliminary expenses of the company

• (D) In purchasing its own shares (buy back)

Answer explanation

Explanation:

The securities premium amount cannot be used to issue partly paid up bonus shares to shareholders, as the shares are partly paid up.It can only be used for:

(i) To issue fully paid-up bonus shares to the shareholders.

(ii) To write off preliminary expenses of the companies.

(iii) To write off the commission paid or expenses on issue of shares/debentures.

(iv) To pay premium on the redemption of preference shares or debentures of the company.

(v) Buy-back of equity shares and other securities as per Section 68.

Gama Chemicals Ltd. is a newly formed company. How much discount per share can it allow for issuing its shares to the public ?

• 5%

• 6%

• 10%

• None of these

Answer explanation

Explanation: A company cannot issue its shares at a discount as per the Companies Act, 2013.

Assertion (A): Govind Ltd. invited applications for issuing 20,00,000 equity shares of ` 10 each. The public applied for 17,10,000 shares. The company cannot proceed for the allotment of shares.

Reason (R): The application can only be processed if the company receives a minimum of 12.5% subscription.

• (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

• (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• (C) Assertion (A) is true, but Reason (R) is false.

• (D) Assertion (A) is false, but Reason (R) is true.

Answer explanation

Explanation: The company can only proceed with the allotment when it receives 90% of the application for subscription.

Assertion (A): The securities premium amount received by the company will be shown in the balance sheet directly.

Reason (R): Securities premium account is the a capital receipt.

• (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

• (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• (C) Assertion (A) is true, but Reason (R) is false.

• (D) Assertion (A) is false, but Reason (R) is true.

Answer explanation

Explanation: The company can only proceed with the allotment when it receives 90% of the application for subscription.

Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):

Assertion (A): In case of shares issued on Pro–rata basis, excess money received at the time of application can be utilised till allotment only.

Reason (R): Company has to pay interest on calls in advance @12% p.a. for amount adjusted towards calls (if any).

In the context of the above two statements, which of the following is correct?

• (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

• (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• (C) Assertion (A) is true, but Reason (R) is false.

• (D) Assertion (A) is false, but Reason (R) is true.

Answer explanation

Explanation: The company can only proceed with the allotment when it receives 90% of the application for subscription.

Krishan Ltd has Issued Capital of 20, 00,000 Equity shares of ₹10 each. Till Date ₹8 per share have been called up and the entire amount received except calls of ₹4 per share on 800 shares and ₹3 per share from another holder who held 500 shares. What will be amount appearing as ‘Subscribed but not fully paid capital’ in the balance sheet of the company?

• ₹ 2,00,00,000

• ₹ 1,95,99,000

• ₹ 1,59,95,300

• ₹ 1,99,95,300

A share of ₹ 10 each, issued at ₹ 4 premium out of which ₹ 7 (including ₹ 1 premium) was called up and paid up. The uncalled Capital will be _______

• a) ₹ 7 per share

• b) ₹ 4 per share

• c) ₹ 8 per share

• d) ₹ 3 per share

Attire Ltd, issued a prospectus inviting applications for 12,000 shares of ₹10 each payable ₹3 on application, ₹ 5 on allotment and balance on call. Public had applied for certain number of shares and application money was received. Which of the following application money, if received allow the company to proceed with the allotment of shares, as per SEBI guidelines?

• 32,400

• 26,000

• 23,400

• 12,000

What will be the second entry if excess application money on Equity shares is adjusted

towards allotment and calls and some amount is refunded also?

Data is given below:

Total application money - ₹420,000

Share capital - ₹300,000

Excess application money adjusted towards allotment - ₹30,000

Excess application money adjusted towards Fist Call - ₹30,000

Excess application money adjusted towards Second and Final Call - ₹30,000

Refund - ₹30,000