J.K.

SHAH CLASSES CA INTERMEDIATE - ACCOUNTING

REDEMPTION OF PREFERENCE SHARE

Q.11 In the books of C Ltd.

Journal Entries
Sr. L. Debit Credit
No. Particulars F. ` `
1. Bank A/c Dr. 12,00,000
To Equity Share Capital A/c 10,00,000
To Securities Premium A/c 2,00,000
(Being issue of 1,00,000 equity shares of ` 10
each at a premium of ` 2 per share)

2. 10% Redeemable Preference Share

Capital A/c Dr. 10,00,000
To Preference Shareholders A/c 10,00,000
(Being amount payable on redemption of
Preference Shares transferred to Preference
Shareholders A/c)

3. Preference Shareholders A/c Dr. 10,00,000

To Bank A/c 10,00,000
(Being amount paid on Redemption)

Q.12 In the books of X Ltd.

Journal Entries
Sr. L. Debit Credit
No. Particulars F. ` `
1. Bank A/c Dr. 15,000
Profit / Loss A/c Dr. 3,500
To Investment A/c 18,500
(Being investment sold at loss)

2. Bank A/c Dr. 37,500

To Equity Share Capital A/c [625 × 50] 31,250
To Securities Premium A/c [625 × 10] 6,250
(Being fresh issue made at premium)
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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING

3. Profit / Loss A/c Dr. 33,750

To Capital Redemption Reserve A/c 33,750
(Being Capital Redemption Reserve created)

4. Preference Share Capital A/c Dr. 65,000

Premium on Redemption A/c Dr. 6,500
To Preference Shareholders A/c 71,500
(Being amount due to preference shareholder)

5. Preference Shareholders A/c Dr. 71,500

To Bank A/c 71,500
(Being amount paid to preference
shareholders)

6. Profit / Loss A/c Dr. 6,500

To Premium on Redemption A/c 6,500
(Being premium written off)

Balance sheet of X Ltd. as on 31.03.2013

Particulars Notes No. C.Y. P.Y.
I. EQUITY AND LIABILITIES
(1) Shareholders funds
(a) Share Capital 1 2,56,250
(b) Reserves and Surplus 2 44,250
(2) Current Liabilities
(a) Trade Payables 56,500
Total 3,57,000
II. ASSETS
(1) Property, Plant and Equipment
(a) Tangible Assets 3,45,000
(2) Current Assets
(a) Cash and Cash equivalent 3 12,000
Total 3,57,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING
Notes to Accounts:

(1) Share Capital

Authorized ?
Issued Subscribed & Paid up
5,125 equity share of ` 50 each fully paid 2,56,250

(2) Reserve and Surplus

Profit and Loss Account (48,000 – 6,500 – 33,750 – 3,500) 4,250
Capital Redemption Reserve 33,750
Securities Premium 6,250
44,250
(3) Cash & Cash Equivalent
Balance with Bank
[31,000 + 37,500 – 71,500 + 15,000] 12,000

Working Note:
1. Calculation of No. of shares to be issued
Cash required for Redemption of Preference Share
(65,000 + 10%) 71,500
(+) Closing Cash Balance 12,000
Total requirements 83,500
(-) Opening balance of cash (31,000)
(-) Investment sold (15,000)
Balance Funds required 37,500
(÷) Issue Price (50 + 10) ÷ 60
No. of equity shares to be issued 625

2.
FV of PSC to be redeemed = Proceeds (FV) of F.I. + DP transfer to
of shares CRR
65,000 = 31,250 + 33,750
P&L

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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING
Q.13 In the books of C Ltd.
Journal Entries
Sr. L. Debit Credit
No. Particulars F. ` `
1. Bank A/c Dr. 1,00,000
To 14% Debentures A/c 1,00,000
(Being issue of 1,000, 14% debentures of `
100 each)

2. Bank A/c Dr. 2,50,000

To Equity Share Capital A/c 2,50,000
(Being issue of 25,000 equity shares of ` 10
each)

3. Profit / Loss A/c Dr. 50,000

To Capital Redemption Reserve A/c 50,000
(Being Capital Redemption Reserve created)

4. 12% Redeemable Preference Share

Capital A/c Dr. 3,00,000
Premium on Redemption A/c Dr. 30,000
To Preference Shareholders A/c 3,30,000
(Being amount due to preference shareholders)
5. Preference Shareholders A/c Dr. 3,30,000
To Bank A/c 3,30,000
(Being amount paid to preference
shareholders)

6. Profit / Loss A/c Dr. 30,000

To Premium on Redemption A/c 30,000
(Being amount of premium written off)

Working Note:
FV of PSC to be redeemed = Proceeds (FV) of F.I. + DP transfer to
of shares CRR
3,00,000 = 2,50,000 + 50,000
P&L

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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING
Q.14 In the books of TATA Steel Ltd.
Journal Entries
Sr. L. Debit Credit
No. Particulars F. ` `
1. Bank A/c Dr. 3,75,000
To 7.5% cumulative Preference Share
Capital A/c 3,00,000
To Securities Premium A/c 75,000
(Being fresh / new issue made)
2. General Reserve A/c Dr. 3,00,000
To Capital Redemption Reserve A/c 3,00,000
(Being Capital Redemption Reserve created)
3. 8% Redeemable Preference Share
Capital A/c Dr. 6,00,000
Premium on Redemption A/c Dr. 60,000
To Preference Shareholders A/c 6,60,000
(Being amount due to preference shareholders)
4. Preference Shareholders A/c Dr. 6,60,000
To Bank A/c 6,60,000
(Being amount paid to Preference shareholders)
5. Securities Premium A/c Dr. 60,000
To Premium on Redemption A/c 60,000
(Being premium on redemption written off)
6. Share final call A/c Dr. 4,00,000
To Equity Share Capital A/c 4,00,000
(Being final call due)
7. Capital Reserve A/c Dr. 85,000
General Reserve A/c Dr. 3,15,000
To Bonus to Shareholders A/c 4,00,000
(Being bonus declared)
8. Bonus to Shareholders A/c Dr. 4,00,000
To Share final call A/c 4,00,000
(Being bonus adjusted against share final call)
9. Capital Redemption Reserve A/c Dr. 3,00,000
Securities Premium A/c Dr. 15,000
General Reserve A/c Dr. 1,85,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING

To Bonus to Shareholders A/c 5,00,000

(Being bonus declared)
10. Bonus to Shareholders A/c Dr. 5,00,000
To Equity Share Capital A/c 5,00,000
(Being bonus transferred to Equity Share
Capital)

Working Note:
1.
FV of PSC to be redeemed = Proceeds (FV) of F.I. + DP transfer to
of shares CRR
6,00,000 = 3,00,000 + 3,00,000
(6,000 x 100) GR

2.
Premium on Redemption = SP (if Q.s specify ) + DP
60,000 = 60,000 + NIL
(6,000 x 10)

3. Final call bonus

Amount of Bonus = Amount of Final call = 4,00,000

Capital Reserve General Reserve

85,000 3,15,000

4. Fully Paid Bonus

Held Bonus Shares
4 1
20,000 ? 5,000 shares

Amount of Bonus = 5,000 x 100 = 5,00,000

CRR SP GR
15,000
3,00,000 1,85,000
(75,000 – 60,000)

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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING
Q.15 In the books of Comfortable Ltd.
Journal Entries
Sr. L. Debit Credit
No. Particulars F. ` `
1. Bank A/c Dr. 4,000
To Calls-in-arrears A/c 4,000
(Being arrears of 200 shares received)

2. 11% Redeemable Preference Share

Capital A/c Dr. 10,000
To Calls-in-arrears A/c 2,000
To Share Forfeiture A/c 8,000
(Being remaining 100 shares forfeited)

3. Share forfeiture A/c Dr. 8,000

To Capital Reserve A/c 8,000
(Being amount in share forfeiture account
transferred to capital reserve)

4. Bank A/c Dr. 27,000

Profit / Loss A/c Dr. 3,000
To Investment A/c 30,000
(Being investment sold at loss)

5. Bank A/c Dr. 30,000

To Equity Share Capital A/c 20,000
To Securities Premium A/c 10,000
(Being issue of 2,000 equity shares of ` 10
each at a premium of ` 5 per share)

6. General Reserve A/c Dr. 31,000

Profit and loss A/c Dr. 17,000
Capital Reserve A/c Dr. 22,000
To Capital Redemption Reserve A/c 70,000
(Being Capital Redemption Reserve created)

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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING

7. 11% Redeemable Preference Share

Capital A/c Dr. 90,000
Premium on Redemption A/c Dr. 9,000
To Preference Shareholders A/c 99,000
(Being amount due to preference shareholders)

8. Preference Shareholders A/c Dr. 96,800

To Bank A/c 96,800
(Being amount paid to Preference shareholders)
9. General reserve A/c Dr. 9,000
To Premium on Redemption A/c 9,000
(Being premium on redemption written off)

Working Note:
1.
FV of PSC to be redeemed = Proceeds of F.I + DP transfer to
shares CRR
90,000 = 20,000 + 70,000
(900 x 100)

GR P&L CR
31,000 17,000 22,000

2. Premium on Redemption = 900 x 10 = 9,000GR

Balance sheet of Comfortable Ltd. as on 31.03.2018

Particulars Notes No. C.Y. P.Y.
I. EQUITY AND LIABILITIES
(1) Shareholders funds
(a) Share Capital 1 2,20,000
(b) Reserves and Surplus 2 1,08,000
(2) Current Liabilities -
Total 3,28,000
II. ASSETS
(1) Property, Plant and Equipment
(a) Tangible Assets 2,60,000
(2) Current Assets (net) 3 68,000
Total 3,28,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ACCOUNTING
Notes to Accounts:
(1) Share Capital
Equity share capital (1,00,000 + 20,000) 1,20,000
10% Redeemable preference share capital 1,00,000
2,20,000
(2) Reserve and Surplus
Capital Redemption Reserve 70,000
Capital Reserve (36,000 – 22,000 + 8000) 22,000
Securities Premium 16,000
1,08,000
(3) Current Assets (NET i.e. current assets – current liablity)
(1,06,000 + 4,000 + 27,000 – 96,800 + 30,000 – 2,200 i.e. 68,000
amount payable to PSH)

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