Exercises

(a) to

(e) are based on the following statement of financial position.

\section*{$J$ Sim Ltd \\ Statement of Financial Position}

\begin{tabular}{lr}

\hline & $£$ \\

Net assets (except bank) & 20,000 \\

Bank & $\underline{13,000}$ \\

Preference share capital & $\underline{33,000}$ \\

Ordinary share capital & 5,000 \\

Share premium & 15,000 \\

Retained profits & $\underline{2,000}$ \\

\hline

\end{tabular}

Note also that each of exercises

(a) to

(e) is independent of any other. The exercises are not cumulative.

\section*{Required:}

(a) JSim 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 statement of financial position after completion of these transactions. Workings are to be shown as journal entries.

(b) J Sim Ltd redeems $£ 5,000$ preference shares at par, with no new issue of shares to provide funds. Show the statement of financial position after completing the transaction. Workings: show journal entries.

(c) J Sim 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 statement of financial position after these transactions have been completed; also show the necessary journal entries.

(d) J Sim Ltd redeems $£ 5,000$ preference shares at a premium of $25 \%$. 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 statement of financial position after these transactions have been completed, and the supporting journal entries.

(e) JSim Ltd redeems $£ 5,000$ preference shares at a premium of $40 \%$. 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 $30 \%$. Show the statement of financial position after these transactions have been completed, and also the supporting journal entries.