Model: Redemption of preference shares at premium—Partly out of fresh issue of shares and partly out of profits. Raj Gopal Ltd. has an authorized capital of Rs.10,00,000 comprising 3,000 8% redeemable preference shares ofRs.100 each and 70,000 equity shares of Rs.10 each. The preference shares are redeemable on 31 March 2011 at a premium of 10%. The summarized balance sheet was as follows:
|
Liabilities |
|
Assets |
|
|
Share Capital: |
Sundry assets |
5,00,000 |
|
|
Authorized: |
Investments |
30000 |
|
|
70,000 Equity Shares of Rs. 10 Each |
7,00,000 |
Bank |
1,20,000 |
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3,000 8% Preference Shares of Rs.100 |
|||
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Each |
3,00,000 |
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Paid-up Capital: |
|||
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30,000 Equity Shares of Rs. 10 Each |
3,00,000 |
||
|
2,000 8% Preferences Shares of Rs. 100 |
100,000 |
||
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Each |
|||
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Capital Reserve |
20,000 |
||
|
General Reserve |
30,000 |
||
|
Profit & Loss A/c |
40,000 |
||
|
Sundry Creditors |
60,000 |
||
|
6,50,000 |
6,50,000 |
he Board has passed necessary resolutions duly and the following transactions took place:
- To provide cash for redemption of preference shares, the investments were sold for 50,000 and 15,000 equity shares of Rs.10 each were issued to the existing shareholders at Rs.12 per share payable in full. All moneys were duly redeemed.
- The redeemable preference shares were duly redeemed.
You are required to give necessary journal entries and the amended balance sheet.