Question

Question 4 (30 Marks) Epsilon Limited a company that sell contemporary home accessories was incorporated on 1 April 2017 with an authorized share capital consisting of the following: 000 000 ordinary shares at N$20 each (600 000 ordinary shares issued). ● ● 200 000 8% Redeemable preference shares at N$15 each (200 000 shares issued). These shares were classified as liability. Other balances as at 31 May 2021: ● Share premium account N$450 000 ● Retained earnings N$1 875 500 After getting approval from the shareholders at the annual general meeting the board decided to redeem all the 8% redeemable preference shares as soon as it was feasible to do so. The redemption of the 8% redeemable preference would be partly funded by issuing 100 000 new ordinary shares as well utilization of retained earnings. 01 November 2021: 15 November 2021: 30 November 2021: 31 March 2022: Issued 150 000 ordinary shares at N$20.75 and all shares were subscribed. The full share issue was underwritten by Fox Brokers Ltd at a commission of 2.5%. Shares were allotted to the applicants and the transaction with the underwriter were concluded. Redemption of 8% redeemable preference shares at a premium of 20 cents. Accrued dividend for the current year was paid to the applicable shareholders. It was decided to write off premium on redemption and underwriters commission against retained earnings. Profit after tax for the period amounted to N$650 525. The board had agreed to transfer N$50 000 to an asset's replacement reserve. Land and buildings were revalued upwardly by N$555 000. YOU ARE REQUIRED TO: 1) Journalize the transactions pertaining to the period 01 November 2021 to 31 March 2022. (20 Marks) 2) Prepare the retained earnings ledger account as at 31 March 2022. This account should be properly balanced off. (10 Marks).​

Answer 1

who you think i am? i’m not reading that

Answer 2

1) Journal Entries:

Date | Particulars | Debit (N$) | Credit (N$)

--- | --- | --- | ---

01-Nov-21 | Bank A/c Dr. | 3,112,500 |

| Share Capital A/c Dr. | 3,000,000 |

| Share Premium A/c Dr. | 412,500 |

| To Allotment A/c (150,000 x N$20.75) | | 3,112,500

| (Issuance of 150,000 ordinary shares at N$20.75 per share, fully subscribed and underwritten by Fox Brokers Ltd at a commission of 2.5%) |

15-Nov-21 | Preference Shares Redemption A/c Dr. | 3,000,000 |

| Premium on Redemption A/c Dr. | 40,000 |

| To Bank A/c (200,000 x N$15.20) | 3,040,000 |

| (Redemption of 200,000 redeemable preference shares at N$15 per share at a premium of 20 cents) |

30-Nov-21 | Dividend Payable A/c Dr. | 16,000 |

| To Preference Dividend A/c | | 16,000

| (Accrued preference dividend for the current year paid to applicable shareholders) |

31-Mar-22 | Asset Replacement Reserve A/c Dr. | 50,000 |

| Retained Earnings A/c Dr. | 627,500 |

| To Profit and Loss A/c | | 650,525

| To Land and Building Revaluation Reserve A/c | | 555,000

| To Premium on Redemption A/c | | 40,000

| To Underwriting Commission A/c | | 10,025

| (Transfer of N$50,000 to asset replacement reserve, write-off of N$645,025 against retained earnings for land and building revaluation reserve, premium on redemption, and underwriting commission, and recognition of profit after tax of N$650,525)

2) Retained Earnings Ledger Account:

| Date | Particulars | Debit (N$) | Credit (N$) |

| --- | --- | --- | --- |

| 31 May 2021 | Balance b/d | 1,875,500 | |

| 31 Mar 2022 | Asset Replacement Reserve A/c | 50,000 | |

| 31 Mar 2022 | Profit and Loss A/c | 650,525 | |

| 31 Mar 2022 | Land and Building Revaluation Reserve A/c | 555,000 | |

| 31 Mar 2022 | Premium on Redemption A/c | 40,000 | |

| 31 Mar 2022 | Underwriting Commission A/c | 10,025 | |

| 31 Mar 2022 | Balance c/d | | 2,781,950 |

| | | 3,181,050 | 3,181,050 |