Paper 2 · June 2018 · Company Accounts and Share Capital

Green Limited had 60,000 4% redeemable preference shares of $1 each. On 30 June 2015 it redeemed 25% of these preference shares at a premium of 10%. What amount in total was paid to redeem the shares?

A$15,000

B$15,750

C$16,500

D$19,800

Explanation

Shares redeemed = 25% × 60,000 = 15,000 shares. Redemption price per share =

1.00 nominal + 10% premium =

1.10. Total paid = 15,000 ×

1.10 =

16,500 (not the par value alone, a smaller 5% premium, or a redemption of the wrong proportion of shares).

Derived from ZIMSEC Accounting Paper 2, June 2018, Q2

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