Question

Y Ltd. has 2,00.000 9% redeemable preference shares of 10 each fully paid. The
company decides to redeem the shares at par. For the purpose, it issues 80,000 equi
shares at 10 each. The Board also decides to utilise a general reserve of 7,00.000
any amount required from profit and loss account which has a credit balance of 6,00.000
The issue was fully subscribed and all the amounts were received. The redemption was
duly carried out. Give journal entries.
deemable preference shares of 100​

Answer 1

Answer:

Preference shares are to redeemed using some of the company's assets and issuing new shares.

Preferencesharetoberedeemed=Facevalueofshare+Premium

Substitute values in the above equation

Preferencesharetoberedeemed=Rs6,00,000+Rs60,000=Rs6,60,000

Equitysharestobeissue=

Marketvalueofshare

RedeemableValue−Cashused−Salevalue

Substitute values in the above equation

Equitysharestobeissue=

105

Rs6,60,000−Rs50,000−Rs4,00,000

=

105

Rs2,10,000

=2000shares

Hence, X Ltd has to issue 2000shares for the redemption purpose.

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