Question 1: (Total 30 marks)
The draft statement of financial position of season’s plc at 30 November 2019 was as follows:
RO 000 RO 000
Ordinary shares of £1 each, fully paid 15,000 Product development costs 1,750
12% preference shares of £1 each, fully paid 10,000 Sundry assets 40,212
Share premium 5,000 Cash and bank 6,813
Retained (distributable) profits 5,750
Payables 13,025 __
48,775 48,775
Preference shares of the company were originally issued at a premium of RO 0.025 per share. The directors of the company
decided to redeem these shares at the end of December 2019 at a premium of RO 0.05 per share. They also decided to write off the balances on development costs and discount on debentures (see below).
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 November 2019:
(a) On 5 November the company issued for cash 3,000,000 12.5% debentures of RO I each at a discount of 3 1⁄4 %.
b) On 6 November the balances on development costs and discount of debentures were written off.
(c) On 14 November the company issued for cash 7,500,000 ordinary shares at a premium of RO 0.125 per share. This was a specific issue to help redeem preference shares.
(d) On 29 November the company redeemed the 12% preference shares at a premium of RO 0.0625 per share.
(e) On 30 November the company made a bonus issue, to all ordinary shareholders, of one fully paid ordinary share for every 25 shares held.
(f) During November the company made a net profit of RO 343,750 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 Season plc to record the transactions for November 2019.
(15 Marks)
(b) Prepare the company’s statement of financial position as at 30 November 2019