Question
On January 1, xxxx, A Ltd established by 4 shareholders: Mr Ali, Ms Bushra, Mr Kamran and Mrs Danish. Each shareholder owns 25% of the
On January 1, xxxx, A Ltd established by 4 shareholders: Mr Ali, Ms Bushra, Mr Kamran and Mrs Danish. Each shareholder owns 25% of the share capital, originally sold at a premium of Rs. 350 per share. The company has 100 shares of nominal value of Rs.100 each and has a total share premium of Rs. 35,000.
On 31st December xxxx, the management of A Ltd has decided to buy back some of the shares. They presented the offer to all shareholders and Ms Bushra agreed to dispose of her investment in response to the offer for an amount of Rs. 15,000. The company is going to purchase its own shares with agreed terms and conditions.
Requirement: 1. What are the accounting entries of the issue and buyback of shares (separate entries of both events are required)? 2. What are the advantages of shares repurchase to the companies?
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