you are required to pass the necessary journal entries to record the above transacti 616968
Model: Utilization of profit and loss A/c balance for redemption—Restricted use Rajabather Ltd. has an issued share capital of 1,300 9% redeemable preference shares of Rs.100 each and 45,000 equity shares of Rs.10 each.
The preference shares are redeemable at a premium of 10% on 1 April 2011. The Company’s balance sheet as on 31 March 2011 was as follows:
|
Liabilities |
Assets |
||
|
Share Capital: |
Fixed Assets |
6,50,000 |
|
|
1,3009%Redeemable Preference Shares |
Investments |
37,000 |
|
|
of 100 Each Fully Paid |
130,000 |
Bank |
63,000 |
|
45,000 Equity Shares of fl0 Each Fully |
|||
|
Paid |
4,50,000 |
||
|
Profit & Loss A/c |
80,000 |
||
|
Sundry Creditors |
90,000 |
||
|
150,000 |
7,50,000 |
To carry out the redemption of preference shares, the Company decided:
- To sell all investments at Rs.30,000
- To finance part of the company from company funds, subject to leaving a balance of Rs.23,000 in the P&L A/c
- To issue sufficient equity shares of Rs.10 each at a premium of 20% per share to raise the balance of funds required
The preference shares were redeemed on due date and the issue of equity shares was fully subscribed. You are required to pass the necessary journal entries to record the above transactions and prepare the balance sheet of the company soon after the redemption is completed.