On 1st April, 2022, the following balances were extracted from the ledger of X Limited: (i) 10% redeemable preference share capital amount: 5,000 shares of ₹ 100 each, fully called up - ₹ 5,00,000 (ii) Securities premium

Journal Entries in the books of X Limited Date Particulars L.F. Amount Dr. (₹) Amount Cr. (₹) 10% Redeemable Preference Share Capital A/c Dr. 5,00,000 Premium on Redemption of Preference Shares A/c Dr. 25,000 To Preference Shareholders A/c 5,25,000 (Being amount due to preference shareholders on redemption at 5% premium) Bank A/c Dr. 2,43,606 To Equity Share Capital A/c 2,21,460 To Securities Premium A/c 22,146 (Allotment of 22,146 equity shares of ₹ 10 each at a premium of ₹ 1 per share) Securities Premium A/c Dr. 25,000 To Premium on Redemption of Preference Shares A/c 25,000 (Utilization of securities premium account for meeting the premium payable on redemption of preference shares) General Reserve A/c Dr. 1,60,000 Profit and Loss A/c Dr. 1,18,540 To Capital Redemption Reserve Account 2,78,540 (Creation of Capital Redemption Reserve Account out of divisible profits for redemption of preference shares) Preference Shareholders A/c Dr. 5,25,000 To Bank A/c 5,25,000 (Payment made to preference shareholders to redeem all the preference shares at a premium of 5%) Working Note: Divisible profits available = General Reserve + Profit and Loss A/c = ₹ 1,60,000 + ₹ 1,18,540 = ₹ 2,78,540 Face value of the Preference share to be redeemed = ₹ 5,00,000 Minimum amount of new issue required for redemption = Face Value of Preference Shares - Divisible Profits available for CRR = ₹ 5,00,000 - ₹ 2,78,540 = ₹ 2,21,460 Securities premium to be received on new issue = 10% of ₹ 2,21,460 = ₹ 22,146 (assuming ₹ 1 premium on ₹ 10 share is 10%) Total securities premium available = Existing Securities Premium + Securities Premium on new issue = ₹ 14,000 + ₹ 22,146 = ₹ 36,146 Premium payable on redemption of preference shares = 5% of ₹ 5,00,000 = ₹ 25,000 As the total share premium after new issue (₹ 36,146) is sufficient to take care of the premium payable on redemption of preference shares (₹ 25,000), the company can proceed to redeem the preference shares by issuing 22,146 new equity shares of ₹ 10 each.