SPECIALIZED ACCOUNTING TECHNIQUES

ASSIGNMENT THREE

In the context of Section $60$ of the Companies Act $($Cap $486$ of the Laws of Kenya$).$ Identify any four conditions that must be met before a company$$s performance shares can be redeemed.

$(4$ marks$)$

The balance sheet of Biashara Ltd$.,$ as at $28$ February $2005$ was as follows:

Sh$.$ Sh$.$

Capital and liabilities: Assets:

Fixed assets $6,000,000$

$500,000$ equity shares of Sh$\mathrm{.}10$ each Investments $2,000,000$

Sh$\mathrm{.}8$ per share called up and paid up $4,000,000$ Stock $2,000,000$

Sundry debtors $2,000,000$

Cash at bank $3,000,000$

$500,00013\%$ redeemable preferences shares of Sh$\mathrm{.}100$ each

$500,000$

Share premium $980,000$

General reserve $900,000$

Profit and loss account balance $1,120,000$

Sundry creditors $3,000,000\_\_\_\_\_\_\_\_\_$

$15,000,00015,000,000$

Additional information:

$1.$ The company resolved:

$$ To convert the partly paid up equity shares into fully paid up shares on $1$ March $2005$ without requiring the shareholders to pay for the same.

$$ To redeem the preference shares on $31$ March $2005$ at a premium of $7\mathrm{.}5\%$ and for his purpose to issue $30,00012\%$ preference shares of Sh$\mathrm{.}100$ each at a premium of $10\%$ payable in full application.

$2.$ For the purpose of redemption, the company sold fixed assets valued at Sh$\mathrm{.}3,000,000$ for Sh$\mathrm{.}3,825,000$ on $31$ March $2005.$ On the same date the company sold all the investments for Sh$\mathrm{.}2,600,000.$

$3.$ On $30$ April $2005$ all payments were made on redemption except to holders of $2,000$ shares who could not be traced.

$4.$ On $31$ May $2005,$ the directors issued fully paid bonus shares to he shareholders existing as at that date at the rate of $3$ shares for every $5$ held at a premium of $5\%.$

Required:

The necessary journal entries in the books of Biashara Ltd$.$ To record the above transactions.