In: Accounting
January 8 A prospectus was issued, inviting applications for 200,000 “B” ordinary shares at an issue price of $2, payable full on application. The purpose of the issue was to fund the redemption of the preference shares.
200,000 “A” ordinary shares, issued at $1, fully paid |
$ 200,000 |
100,000 redeemable preference shares, issued at $ 4, fully paid |
$ 400,000 |
50,000 $2 Options |
$ 100,000 |
Asset revaluation reserve |
$ 100,000 |
Retained earnings |
$ 770,000 |
February 8 The issue closed fully subscribed, with all money due having been received. The 200,000 “B” ordinary shares were allotted on the same day. As previously indicated, the directors resolved to redeem the preference shares (equity) out of the proceeds of the “B” ordinary shares. Cheques were issued to the preference shareholders.
Required:
General journal entries with narrations and working out
Feb-08 | Bank A/c Dr. | 400000 | |
To Share Application A/c | 400000 | ||
(Being "B" Shares Issued and Share Alloted) | |||
200000*2 | |||
Share Application A/c Dr. | 400000 | ||
To Share Capital A/c | 400000 | ||
(Being Share capital transferred) | |||
Redeemable Preference shares Dr. | 400000 | ||
To Preference Share holder's A/c | 400000 | ||
(Being Preference shares have been due for redeemed) | |||
100000*4 | |||
Preference Share holder's A/c Dr. | 400000 | ||
To Bank A.c | 400000 | ||
(Being Paid to preference Share holders) | |||
(As These shares are redeemed by issuing new shares so there is no | |||
need to create Capital Redembtion Reserve Because old capital is | |||
400000 Minus(-) New capital 400000 = 0 |