The following is the summarized balance sheet of a company as on 31 March 2011:
|
Liabilities |
Assets |
||
|
Share Capital: |
Fixed assets |
34,00,000 |
|
|
4,00,000 Equity |
Investments |
3,50,000 |
|
|
Shares of Rs.10 |
Cash at Bank |
3,50,000 |
|
|
Each Fully Paid |
40,00,000 |
Other Current |
29,00,000 |
|
60,0008% |
Assets |
||
|
Redeemable |
|||
|
Preference |
|||
|
Shares of Rs. 20 |
|||
|
Each, Fully Paid |
12,00,000 |
||
|
Profit & Loss A/c |
7,00,000 |
||
|
Sundry Creditors |
11,00,000 |
||
|
70,00,000 |
70,00.000 |
On 1 April 2011, the company decided to redeem preference shares at a premium of 5%. In order to facilitate the redemption of preference shares, it was decided:
- To sell the investments for Rs.3,00,000
- To finance part of the redemption from the company’s funds subject to leaving balance of P&L A/c of Rs.2,00,000
- To issue sufficient equity shares of Rs.10 each at a premium of Rs.2 per share to raise the balance of funds required
The preference shares were redeemed on due date and equity shares were fully subscribed. You are required to pass necessary journal entries and prepare the balance sheet after redemption.