Day: April 3, 2021

When a company redeems shares, it may create a capital redemption reserve.

Why does it create this reserve?

Select ONE answer:

1. to make the Balance Sheet balance
2. to protect the creditors’ rights
3. to provide cash for the redemption
4. to replace the cash used in the redemption

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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