Exercises (a) to (e) are based on the following balance sheet.

Note also that exercises (a) to (e) are independent of each other. They are not cumulative.

Required:

(a) BAR Ltd purchases £10,000 of its own ordinary share capital at par. To help finance this £7,000 preference shares are issued at par. Show the necessary journal entries and the balance sheet after the transactions have been completed.

(b) BAR Ltd purchases £12,000 of its own ordinary shares at a premium of 20 per cent. No new issue of shares is made for the purpose. It is assumed that the share premium account is in respect of the issue of preference shares some years before. Show the balance sheet after the transactions have been completed, and also the supporting journal entries. 

(c) BAR Ltd purchases all the preference share capital at par. These shares were not originally redeemable preference shares. There is no new issue of shares to provide funds. Show the requisite journal entries, and the closing balance sheet when the transaction has been completed.

(d) BAR Ltd purchases £12,000 of its own ordinary shares at par, a new issue of £12,000 preference shares at par being made for the purpose. Show the journal entries needed and the balance sheet after completing these transactions.

(e) BAR Ltd purchases £6,000 ordinary shares at a premium of 50 per cent. They had originally been issued at a premium of 20 per cent. There is an issue of £10,000 preference shares at par for the purpose. Show the amended balance sheet, together with the journal entries.

Transcribed Image Text:

Net assets (except bank) Bank Preference share capital Ordinary share capital Share premium Profit and loss BAR Ltd Balance Sheet £ 31,000 16,000 47,000 8,000 20,000 4,000 32,000 15,000 47,000