The draft statement of financial position of Telin plc at 30 September 20X5 was as follows: Preference

Question:

The draft statement of financial position of Telin plc at 30 September 20X5 was as follows:

Preference shares of the company were originally issued at a premium of 2p per share. The directors of the company decided to redeem these shares at the end of October 20X5 at a premium of 5p per share. They also decided to write off the balances on development costs and discount on debentures.
All write-offs and other transactions are to be entered into the accounts according to the provisions of the Companies Acts and in a manner financially advantageous to the company and to its shareholders.
The following transactions took place during October 20X5:
(a) On 4 October the company issued for cash 2,400,000 10% debentures of £I each at a discount of 21„2%.
(b) On 6 October the balances on development costs and discount of debentures were written off.
(c) On 12 October the company issued for cash 6,000,000 ordinary shares at a premium of 10p per share. This was a specific issue to help redeem preference shares.
(d) On 29 October the company redeemed the 12% preference shares at a premium of 5p per share and included in the payments to shareholders one month€™s dividend for October.
(e) On 30 October the company made a bonus issue, to all ordinary shareholders, of one fully paid ordinary share for every 20 shares held.
(f) During October the company made a net profit of £275,000 from its normal trading operations. This was reflected in the cash balance at the end of the month.

Required:
(a) Write up the ledger accounts of Telin plc to record the transactions for October 20X5.
(b) Prepare the company€™s statement of financial position as at 31 October 20X5.
(c) Briefly explain accounting entries which arise as a result of redemption of preferenceshares.

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