Sidharatha Trading Co. Ltd. has an Authorized Capital of 16,00,000 divided in to : 20,000 6% Preference Shares of 10 each 40,000 7% Preference…
CA Foundation · Accounting · MTP · June 2024
Sidharatha Trading Co. Ltd. has an Authorized Capital of 16,00,000 divided in to : 20,000 6% Preference Shares of 10 each 40,000 7% Preference Shares of 10 each; and 30,000 Equity Shares of 10 each. On 1st January, 2011, the whole of the two classes of preference shares and - 30,000 equity shares stood in the books as fully paid. The securities premium account as on that date showed at balance of 40,000. The balance of profit was - 64,000. On 1st July, 2011 is was decided to redeem the whole of 6% preference shares at a premium of 1 per share and for this specific purpose, the company issued for cash - 16,000 equity shares of 10 each at a premium of 2 per share, payable full on allotment. All the above shares were taken up. The cost of issue of shares amounted to 6,000 adjusted by security premium account. On 1st October, 2011, the company issued to all equity shareholders one bonus shares of 10fully paid for each five held. It is the intention of the directors that minimum reduction should be made in revenue reserve account which stood at 2,50,000. Give necessary journal entries.
Suggested Answer and Working Notes:
Siddhartha Trading Co. Ltd. Journal Entries 2011 Particulars Dr. Cr. July,1 6% Redeemable preference share capital A/c Dr. Premium on redemption of preference shares A/c Dr. To Preference shareholders a/c (Being amount due on redemption of20,000,6% preference shares of 10each at a premium of10%) 2,00,000 20,000 2,20,000 July,1 Bank A/c (E.S. Application A/c) Dr. To Equity share capital A/c To Securities premium A/c (Being issue of16,000, equity shares of Rs. each at a premium of 2per share for redeeming6% preference shares) 1,92,000 1,60,000 32,000 July,1 Cost of issue A/c Dr. To Bank A/c (Being expenses incurred on issue of equity shares) 6,000 6,000 July,1 Securities premiums A/c Dr. To Cost of issue A/c (Being amount of premium utilized for providing writing off cost of issue) 6,000 6,000 July,1 Profit and Loss A/c Dr. To Premium on redemption of preference shares A/c (Being amount of PL utilized for providing premium on redemption) 20,000 20,000 July,1 Profit and Loss A/c Dr. To Capital redemption reserve A/c (Being amount provided out of profit and loss account for redeeming preference shares which could not be redeemed out of fresh issue of shares) 40,000 40,000 Oct,1 Preference shareholder A/c Dr. To Bank A/c (Being payment of amount due on redemption of preference shares) 2,20,000 2,20,000 Oct,1 Capital redemption reserve A/c Dr. Securities premium A/c Dr. To Bonus to equity shareholders A/c (Being amount required for issue of9,200 bonus shares of 10each @1 share for every5equity shares held on October, 1 provided out of various reserves utilizing the minimum of revenue reserves) 40,000 52,000 92,000 Bonus to equity shareholders A/c Dr. To Equity share capital A/c (Being issue of9,200 equity shares of 10Each as fully paid bonus shares) 92,000 92,000
Topics: Theoretical Framework
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