Redemption of Preference Shares Illustrations

ILLUSTRATIONS ON REDEMPTION OF PREFERENCE SHARES
1)
From the following particulars, determine the minimum amount of fresh issue of shares of Rs. 10 each to be made at par
for the redemption of preference shares at a premium of 5%.
Rs. In lakhs
(i) Fully paid redeemable preference shares 800
(ii) Capital Reserve 120
(iii) General Reserve 270
(iv) P&L Account (cr balance) 80
(v) Securities premium Account 30
2)
3)
4)
5)
The following information gathered from the balance sheet of Abhinav Limited as on 31 st March, 2017 is given to you:
Share Capital Rs. Rs.

20,000 12 %Preference Shares of Rs. 50 each, fully paid 10, 00,000
1,00,000 Equity Shares of Rs. 10 each, Rs. 7.50 per share called up 7,50,000
Less: Calls unpaid 7,500 7, 42,500
Securities Premium Account 50,000
General Reserve 6, 00,000
Calls in Advance (final call on equity shares) 2,500
(i) On 1st April, 2014 the Board of Directors decide the following:
The fully paid preference shares are to be redeemed at a premium of 5% in May, 2014 and, for that purpose,
50,000 equity shares of Rs. 10 each are to be issued at par to be paid for in full on application in April, 2014.
(ii) The final call of Rs. 2.50 per share is to be made in July, 2014.
(iii) The 1,000 equity shares owned by A an existing shareholder, who failed to pay the allotment money of Rs.
2.50 per share and the first call of Rs.2.50 per share, were forfeited in the month of June, 2014.
The above decisions were duly complied with according to the time schedule laid down.
The amounts due on the issue of fresh equity shares and on final call were duly received except from B, who failed to
pay the first call money on his 1,000 shares has failed to pay the final call money also. These shares of B were
forfeited in the month of August, 2014.
Of the total shares forfeited, 1,500 shares were issued to X in September, 2014, credited as fully paid at Rs. 9 per
share, the whole of A’s share being included.
Pass journal entries in the books of the Company to record these transactions and show the relevant items on the
liabilities side of the balance sheet (necessary extracts) according to the form prescribed by the Companies Act, 1956.
Assume that resources required for payment are available.
6)
7)
The following notes to Ronnie Ltd’s Balance Sheet are given to you:-
Rs.
(1) Share Capital :

Authorised 35,00,000
Issued and Subscribed:
1,50,000 Equity Shares of Rs. 10 each, fully paid up 15,00,000
5,000 11% Redeemable Preference Shares of Rs. 100 each, 4,50,000
Rs. 90 called and paid up
(2) Reserves & Surplus:
Capital Reserve 75,000
Securities Premium 15,000
General Reserve 1,60,000
Profit & Loss A/c 1,85,000
The company decides to redeem all the preference shares at a premium of 1 % . For the specific purpose of such
redemption, it issues 2,000 14 % redeemable preference shares of Rs. 100 each at a premium of 5%, the entire amount
being payable along with application. The whole issue is taken up by the public. The redemption of 11% redeemable
preference shares is duly completed.
Journalise the above mentioned transactions.
8)
9) On 31st March, 2015 the balance sheet of Utopia limited stood as follows:-
Balance Sheet
Note No. Rs.
I. Equity and Liabilities
1 Shareholders' funds
Share capital 1 14,50,000
Reserves & Surplus 2 12,50,000
2 Current Liabilities
Trade payables 2,50,000
29,50,000
II. Assets
1 Non Current Assets
Fixed Assets
Tangible Assets 3 19,90,000
2 Current Assets
Current Investments 4 1,45,000
Inventories 5,61,200
Trade Receivables 1,42,800
Cash and Cash Equivalents 1,11,000
29,50,000
Notes:
1 Share Capital
Authorised 20,00,000
Issued, Subscribed and Paid up:
1,00,000 Equity Shares of Rs.10 each, fully paid 10,00,000
4,500 12% Redeemable Preference Shares of Rs. 100 each, fully paid 4,50,000
14,50,000
2 Reserves & Surplus
Securities Premium 32,500
General Reserve 8,30,000
P & L Account (credit balance) 3,87,000
12,49,500
3 Tangible Assets
Land & Buildings 6,00,000
Plant & Machinery 10,00,000
Furniture, Fittings & Fixtures 3,90,000
19,90,000
4 Current Investments
Investment in Mutual Funds 1,45,000
5 Cash & Cash Equivalents

Balance with Bank 1,02,500
cash on Hand 8,500
1,11,000
On 1st April, 2015 in order to redeem all of its preference shares at a premium of 5%, the company issued
20,000 equity shares of Rs. 10 each at a premium of 10% and sold all its investments in the Mutual Funds for
Rs. 158,000.
After the redemption of the preference shares, the company issued one fully paid equity share of Rs. 10 as
bonus for every four shares held by its members.
Show journal entries for all the above mentioned transactions and prepare the balance sheet of the company
immediately after the issue of bonus shares.

Redemption of Preference Shares Illustrations

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ILLUSTRATIONS ON REDEMPTION OF PREFERENCE SHARES

Share Capital Rs. Rs.

(1) Share Capital :

Journalise the above mentioned transactions.

5 Cash & Cash Equivalents

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