Sun Rise Ltd. issued share capital of 30,000 12% redeemable preference shares of Rs.20 each and 2,00,000 equity shares of Rs.10 each. The preference shares are redeemable at a premium of 5% on 1 January 2011. As at 31 December 2011, the company’s balance sheet stood at as follows:
|
Liabilities |
Assets |
Rs |
|
|
Issued Share |
Plant & |
||
|
Capital: |
6,00,000 |
Machinery |
12,50,000 |
|
30,00012% |
Furniture & |
||
|
Redeemable |
Fixtures |
4,50,000 |
|
|
Pref. Shares of |
Investments |
1,75,000 |
|
|
Rs20 Each Fully |
Stock |
7,50,000 |
|
|
Paid |
Debtors |
7,00,000 |
|
|
2,00,000 Equity |
20,00,000 |
Bank |
1,75,000 |
|
Shares of Rs 10 |
|||
|
Each Fully Paid |
|||
|
Profit & Loss A/c |
3,50,000 |
||
|
Sundry Creditors |
5,50,000 |
||
|
35,00,000 |
35,00,000 |
In order to facilitate the redemption of preference shares, it was decided
- To sell the investments for Rs.,1,50,000
- To finance part of the redemption from the company funds subject to leaving of balance in P&L A/c Rs.1,00,000.
- To issue sufficient equity shares of Rs.10 each at a premium of Rs.2 per share to raise the balance of funds required
All the above-mentioned decisions were fully carried out and the preference shares were duly redeemed.
You are required to prepare:
- Journal entries to record the above transactionsA memorandum balance sheet as on completion of redemption