Question

The balance sheet of Redemption Ltd., as at 31st March 1987 is as follows Liabilities RS Assets 10,000 equity shares of Rs. 10 Fixed assets 2.62.000 each fully paid up 1,00,000 Debtors 90,000 11% Redeemable preference Stock 30.000 shares of Rs. 100 each Investments 30.000 fully called up 1.00.000 Bank 4.000 Less Calls-in-arrears @ 20 per share 6,000 94.000 10% preference shares of Rs. 10 each fully paid General Reserve Profit & Loss A/C Securities Premium Capital Reserve Creditors 1.00.000 40.000 20.000 5.000 30.000 27,000 4,16,000 4.16.000 Redeemable preference shares were due for payment on 1st April 1987 at a premium of 10%. The company sent reminders for the final call on the remaining 300 redeemable preference shares and could collect money from shareholders holding 200 shares @ Rs. 20 per share and forfeited the defaulting 100 shares. The company sold all investments and could recover 90% of the cost of such investments. The company issued adequate number of new equity shares at par, to the extent available profits were insufficient to backup the redemption. Draft journal entries and prepare the balance sheet of the company after redemption.​

Answer 1

Answer:

preference shares are redeemed at premium, then such premium must be provided either out of the profits of the company or out of the company's security premium account. (6) The Capital Redemption Reserve Account can be utilized for the issue of fully paid bonus shares to the shareholders.