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

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

Required:

(a) RSV Ltd redeems £5,000 preference shares at par, a new issue of £5,000 ordinary shares at par being made for the purpose. Show the balance sheet after completion of these transactions. Workings are to be shown as journal entries.

(b) RSV Ltd redeems £5,000 preference shares at par, with no new issue of shares to provide funds. Show the balance sheet after completing the transaction. Workings: show journal entries.

(c) RSV Ltd redeems £5,000 preference shares at par. To help finance this an issue of £1,500 ordinary shares at par is effected. Show the balance sheet after these transactions have been completed; also show the necessary journal entries.

(d) RSV Ltd redeems £5,000 preference shares at a premium of 25 per cent. There is no new issue of shares for the purpose. In this question the share premium account is taken as being from the issue of ordinary shares some years ago. Show the balance sheet after these transactions have been completed, and the supporting journal entries.

(e) RSV Ltd redeems £5,000 preference shares at a premium of 40 per cent. There is an issue of £7,000 ordinary shares at par for the purpose. The preference shares had originally been issued at a premium of 30 per cent. Show the balance sheet after these transactions have been completed, and also the supporting journal entries.

Transcribed Image Text:

Net assets (except bank) Bank Preference share capital Ordinary share capital Share premium Profit and loss RSV Ltd Balance Sheet £ 20,000 13,000 33,000 5,000 15,000 2,000 22,000 11,000 33,000