Mukti Ltd. (a non-listed company) provide the following information as on 31.3.2023: (₹) Land and Building 21,50,000 Plant & Machinery 15,00,000…

CA Intermediate · Advanced Accounting · RTP · May 2024
Mukti Ltd. (a non-listed company) provide the following information as on 31.3.2023: (₹) Land and Building 21,50,000 Plant & Machinery 15,00,000 Non-current Investment 2,00,000 Trade Receivables 5,50,000 Inventories 1,80,000 Cash and Cash Equivalents 40,000 Share capital:1,00,000 Equity Shares of 10 each fully paid up 10,00,000 Securities Premium 3,00,000 General Reserve 2,50,000 Profit & Loss Account (Surplus) 1,50,000 10% Debentures (Secured by floating charge on all assets) 20,00,000 Unsecured Loans 8,00,000 Tarde Payables 1,20,000 On 21 st April, 2023 the Company announced the buy back of 15,000 of its equity shares @15 per share. For this purpose, it sold all its investment for 2.50 lakhs. On 25 th April, 2023, the company achieved the target of buy back. On 1 st May, 2023 the company issued one fully paid up share of 10 each by way of bonus for every eight equity shares held by the equity shareholders. You are required to pass necessary Journal Entries for the above transactions.

Suggested Answer and Working Notes:

In the books of Mukti Ltd. Journal Entries Date Particulars Dr. ₹ Cr. ₹ 2023 April 21 Bank A/c Dr. 2,50,000 To Investment A/c 2,00,000 To Profit on sale of investment 50,000 (Being investment sold on profit) April 25 Equity share capital A/c Dr. 1,50,000 Securities premium A/c Dr. 75,000 To Equity shares buy back A/c 2,25,000 (Being the amount due to equity shareholders on buy back) Equity shares buy back A/c Dr. 2,25,000 To Bank A/c 2,25,000 (Being the payment made on account of buy back of 15,000 Equity Shares) General Reserve A/c OR P&L A/c Dr. 1,50,000 To Capital redemption reserve A/c 1,50,000 (Being amount equal to nominal value of buy back shares transferred from free reserves to capital redemption reserve account as per the law) May 1 Capital redemption reserve A/c Dr. 1,06,250 To Bonus to equity shareholder A/c (W.N.1) 1,06,250 (Being the utilization of capital redemption reserve to issue bonus shares) Bonus to equity shareholder A/c Dr. 1,06,250 To Equity share capital A/c 1,06,250 (Being issue of one bonus equity share for every ten equity shares held) Working Note: Amount of bonus shares = [(1,00,000 - 15,000) / 8] × 10 = 1,06,250

Topics: Buyback of Securities

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