MCQ of Redemption of Preference Shares
Redemption of Preference Shares MCQsIn this page, you will get MCQ on Redemption of Preferene Shares which are useful for AHSEC and CBSE Class 12, B. Com and Various Professional Exams Like CA/CMA and CS.
We update this page frequently to add new questions. Chapter wise Corporate Accounting MCQs are also included in this post.
In this page, you will get MCQ on Redemption of Preferene Shares which are useful for AHSEC and CBSE Class 12, B. Com and Various Professional Exams Like CA/CMA and CS.
We update this page frequently to add new questions. Chapter wise Corporate Accounting MCQs are also included in this post.
Introduction to Preference Shares
(a) Preference in payment of dividend and
(b) Preference in repayment of capital in case of winding up of the company, must attach to preference shares.
Redeemable and Irredeemable preference shares
Choose
the correct answer to the following questions from the given alternatives:
1. Redeemable
Preference shares can be redeemed out of:
a) The sale proceeds of Investments.
b) The proceeds of a fresh issue of shares.
c) Securities premium reserve.
d) The proceeds of issue of debentures.
Ans: b) The proceeds of a fresh issue of shares.
2. According to
Sec. 55 A company cannot issue redeemable preference shares for a period
exceeding _____________.
a) 6 years.
b) 7 years.
c) 8 years.
d) 20 years.
Ans: d) 20 years.
3. According to
sec. 55 (1)(c) of the Companies Act, 2013, a company can pay back share capital
which is in excess of need if:
a) Authorised by articles.
b) Confirmation of the court.
c) Special resolution is passed to that
effect.
d) All of the above.
Ans: d) All of the above.
4. Which of the
following cannot be used for redemption of preference shares?
a) General reserve
b) Revenue reserve
c) Capital reserve
d) Workmen’s Compensation fund
Ans: c) Capital reserve
5. Which of the
following can be utilized for the redemption of preference shares of a company
out of profit?
a) Shares forfeited account.
b) Development rebate reserve account.
c) Capital redemption reserve account.
d) Securities premium reserve account.
e) Dividend equalisation reserve.
Ans: e) Dividend equalisation reserve.
6. Which of the
following cannot be utilized for the redemption of preference shares of a company?
a) Proceeds of fresh issue of shares.
b) General Reserve.
c) Profit and Loss Account.
d) Dividend equalization reserve.
e) Securities premium on fresh issue of
shares.
Ans: e) Securities premium on fresh issue of
shares.
7. Which of the
following cannot be used for the purpose of creation of capital redemption
reserve account?
a) Profit and loss account (credit balance).
b) General reserve account.
c) Dividend equalization reserve account.
d) Unclaimed dividends account.
Ans: d) Unclaimed dividends account.
8. The Capital
Redemption reserve is created for the following reasons:
a) To maintain the capital intact.
b) To safeguard the interest company’s
creditors.
c) Both of the above.
d) None of the above.
Ans: c) Both of the above.
9. Which of the
following accounts can be transferred to capital redemption reserve account?
a) General reserve account.
b) Forfeited shares account.
c) Profit prior to incorporation.
d) Securities premium account.
Ans: a) General reserve account.
10. According
to Sec. 55 of the Companies Act, 2013, preference shares to be redeemed:
a) Should be fully paid up
b) Should be partly paid up
c) Can be fully or partly paid-up
d) None of the above
Ans: a) Should be fully paid up
11. Capital
redemption reserve can be utilised for:
a) Writing of preliminary expenses
b) Buy back of shares
c) Writing off capital losses
d) For issuing fully paid bonus shares
Ans: d) For issuing fully paid bonus shares
12 When
Redeemable Preference shares are due for redemption, the entry passed is
a) Debit redeemable Preference Share capital
a/c; Credit cash a/c.
b) Debit Redeemable Preference share capital
a/c; credit Preference share holders a/c.
c) Debit preference share holders a/c; credit
cash a/c.
d) Debit preference share holders a/c; credit
capital reduction a/c.
e) Debit redeemable preference share capital
a/c; credit capital reduction a/c.
Ans: b) Debit Redeemable Preference share capital
a/c; credit Preference share holders a/c.
13. Which of
the following statements is false?
a) Redeemable preference share can be issued,
if authorized by the articles of association.
b) The bonus issue can be made out of
securities premium collected only in cash.
c) Redeemable preference share can be
redeemed only when they are fully paid.
d) Premium payable on redemption of
preference share can be provided of company’s securities premium.
e) Redeemable preference shares can be
redeemed only out of profits of the company.
Ans: e) Redeemable preference shares can be
redeemed only out of profits of the company.
14. Which of
the following statements is false?
a) A company can redeem its preference shares.
b) Preference shareholders are creditors of a
company.
c) The part of the authorized capital which
can be called up only in the event of liquidation of a company is called
reserve capital.
d) Capital redemption reserve can be utilized
for issuing fully paid bonus shares.
Ans: b) Preference shareholders are creditors of a
company.
15. Which of
the following statements is false?
a) Capital redemption reserve cannot be used
for writing off miscellaneous expenses and losses.
b) Capital profit realized in cash can be
used for payment of dividend.
c) Reserves created by revaluation of fixed
assets are not permitted to be capitalized.
d) Dividend is payable on the calls paid in
advance by shareholders.
Ans: d) Dividend is payable on the calls paid in
advance by shareholders.
Also Read: Corporate Accounting MCQs Chapterwise
Issue and Redemption of Debentures
Redemption of Preference Shares
16. Which of
the following statements is NOT TRUE with regard to redemption of Preference Shares?
a) Partly paid shares cannot be redeemed.
b) The redemption of Preference shares shall
be taken as reduction of company’s authorized share capital.
c) When shares are issued for redemption in
future, it will not be treated as increase in capital.
d) Preference share can be redeemed either
out of the profit by capitalization or amount of fresh issue of shares.
Ans: b) The redemption of Preference shares shall
be taken as reduction of company’s authorized share capital.
17. Nominal
value of preference shares to be redeemed must be equal to:
a) Issue prices of fresh equity shares
b) Capital redemption reserve account
c) Nominal value of fresh issue of shares and
capital redemption reserve account
d) Capital reserve
Ans: c) Nominal value of fresh issue of shares and capital
redemption reserve account
18. Premium on
redemption of preference shares should be written off:
a) Securities premium reserve account
b) Capital reserves
c) Capital redemption reserve
d) Any type of reserve
Ans: a) Securities premium reserve account
19. Which of the following statements is
correct?
a) Capital
redemption reserve account cannot be utilised for issuing fully paid bonus
shares.
b) Redemption of
preference shares cannot be made out of the fresh issue of debentures.
c) An amount
equal to redemption of preference shares out of the profits must be transferred
to general reserve.
d) A company
can issue irredeemable preference shares
Ans: b) Redemption of preference shares cannot be
made out of the fresh issue of debentures.
20. Redemption of preference shares leads to
reduction in:
a) Authorized
capital
b) Does not
change the authorized capital of the company
c) Increases
the authorized capital
d) Increase
trading profit
Ans: b) Does not change the authorized capital of
the company
MCQ of Redemption of Preference Shares
State whether the following statements are
true or false
1. According to sec. 66 of the Companies Act,
2013, a company is not allowed to return to its shareholders the share money
without the permission of the court. True
2. Permission of court is necessary if refund
is made to preference share
holders. False
3. According to sec. 55 of the companies act,
partly paid shares can be
redeemed. False
4. Partly paid preference shares cannot be
redeemed. True
5. Preference shares can be redeemed out of
the proceeds of fresh issue of
debentures. False
6. CRR can be used for issuing fully paid
bonus shares to the existing shareholders. True
7. CRR can be reduced in accordance with the
sanction of the court relating to reduction of share
capital. True
8. Redemption of share capital can be
regarded as reduction of the authorised share capital of the
company. False
9. Unclaimed dividends account is a liability
of the company. True
10. If preference shares are redeemed out of
distributable profits and amount equal to the face value of shares redeemed is
transferred to Capital Redemption Reserve account (CRR). True