QUESTION 1 (31 Marks)

On 30 April 2020, Emilia Ltd had these balances in their records:

150 000 ordinary shares at no par value 700 000

5% Redeemable cumulative preference shares at N$2,00 each 300 000

Share premium account 45 000

Capital redemption reserve fund 50 000

Retained earnings 258 000

Bank overdraft 105 350

Preliminary expenses 15 000

Dividend Payable 15 000

Underwriters commission (on ordinary shares) 20 000

Inventory 26 350

Property 1 450 000

Equipment 755 600

Accounts receivables 545 650

Accounts Payables 368 000

The authorised share capital of the company is:

250 000 ordinary shares at no par value.

200 000 5% redeemable cumulative preference shares @ N$2,00 each.

150 000 8% redeemable preference shares at N$2,00 each.

The directors have the power to issue un-issued shares and both redeemable preference shares are redeemed at the option of the company.

On 15 May 2020, at a meeting of the directors of Emilia Ltd it was decided that on 01 July 2020, to redeem the 5% redeemable cumulative preference shares at a 10% premium and finance this redemption as follows:

1. A fresh issue of 100 000 8% redeemable preference shares at an issue price at N$2,25/share. This offer was over-subscribed by one and a halftimes with unsuccessful applicants being refunded.

2. The balance is to be provided for out of retained earnings.

Additional information:

(i) Dividend pertaining to preference shareholders have not been paid since 30 April 2019, as the company incurred operating losses up to the commencement of the present financial year.

(ii) To write off all preliminary expenditure and underwriters commission in the Accounting records immediately after the issue of the 8% redeemable preference shares.

(iii) Expenses related to the share issue amount to N$7 000 and premium on redemption were to be written off to share premium.

(iv) Profit for the period is N$ 950 650.

(v) Income tax is payable at 30%. You are required to:

1.1 Prepare the General Journal entries for Emilia Ltd to record the above transactions. (Narrations are not required.) (17 Marks)

1.2 Prepare the statement of changes in equity for the year ended 30 April 2021.