Redemption of Preference Share
Question 1:
P Ltd. has issued 50,000 12% redeemabe preference shares of ₹ 10 each, ₹ 8 paid. In order to redeem these shares now being redeemable, the company issued for cash 30,000 equity shares of ₹ 10 each at a premium of ₹ 2/- per share. Out of the proceeds, preference shares were redeemed, balancce being met out of the General Reserve which stood at ₹ 2,50,000. The comapny then declared the bonus issue of 20,000 ordinary shares to the existing ordinary shareholders out of reserve created for redemption purpose.
Question 2:
Y Ltd. decided to redeem their preference shares as on March, 2025 on which date their position was as under:
The redemption is to be made at a premium of 5%. The capital redemption reserve appearing in the balance sheet is the reserve brought into being as a result of a redemption which took place in 2004. To enable the redempiton to be carried out, the company decides to issue sufficient number of new equity shares at a discount of 10%. The redemption is duly carried out.
Show journal entries relating to the redemption and new issue and also the balance sheet after redemption. Ignore the question of dividend upto the redemption.
