Question
GHI Ltd has a net worth of ₹12 crore, consisting of
equity share capital of ₹8 crore and free reserves of ₹4 crore. The face value of each equity share is ₹20. During the year, the company carried out a buy-back of 15% of its equity shares at ₹65 per share, fully in compliance with the Companies Act, 2013. What amount should be transferred to the Capital Redemption Reserve (CRR)?Solution
No. of shares of the company = share capital/face value = 8,00,00,000/20 = 40,00,000 No. of shares under buy-back = 15% of equity = 15% of 40,00,000 = 6,00,000 shares The capital redemption reserve is created at nominal value of shares i.e. its face value. As such the amount to be transferred will be: No. of shares of buy-back *face value = 6,00,000 * 20 = Rs.1.2 crore
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