On 1 July 2018, Popular Ltd had the following issued capital:

50,000 10% Redeemable preference shares issued at $2 each $100,000

The following transactions occurred during 2021.

	March	1		A disclosure document was issued inviting applications for 100 000 ordinary shares at an issue price of $2.50, payable in full on application. The main purpose of the issue was to fund the redemption of the preference shares.
	March	31		The issue was fully subscribed and all money due was received. The shares were then allotted.
	April	10		The preference shares were redeemed at a price of $2.10 per share. The shares had been classified as equity in the financial statements.

For the above transactions the Accountant recorded the following journal entries:

March 31	Dr Cash Trust	250,000
	Cr Application Ordinary		250,000
	Dr Application Ordinary	250,000
	Cr Share Capital Ordinary		250,000
	Dr Cash	250,000
	Cr Cash Trust		250,000
April 10	Dr Share Capital Preference	100,000
	Dr Retained Earnings (premium)	5,000
	Cr Shareholders redemption		105,000
	Dr Shareholders redemption	105,000
	Cr Cash		105,000

Required

Explain why the above entries are made, noting the adjustment to each account separately.