The correct answer is: C. Decrease of Rs. 50,000/- in working capital
Explanation:
The company redeemed its 2,00,000/- preference shares. For this it issued equity share capital of Rs. 1,50,000/- and Rs. 1,00,000/- bonus shares were also issued.
The net effect of these transactions on fund flow is a decrease of Rs. 50,000/- in working capital. This is because the company has redeemed its preference shares, which has resulted in a decrease in its liabilities. However, the company has also issued equity share capital and bonus shares, which has resulted in an increase in its assets. The net effect of these two transactions is a decrease in working capital.
Here is a detailed explanation of each option:
- Option A: No effect on fund flow. This option is incorrect because the transactions have resulted in a decrease in working capital.
- Option B: Increase of Rs. 50,000/- in working capital. This option is incorrect because the transactions have resulted in a decrease in working capital.
- Option C: Decrease of Rs. 50,000/- in working capital. This option is correct because the transactions have resulted in a decrease in working capital.
- Option D: None of the above. This option is incorrect because the transactions have resulted in a decrease in working capital.