Prepare the journal entries for Question Sixteen, which involves the issue of new ordinary shares and the redemption of redeemable preference shares at a premium.

The company issued 500 ordinary shares at Tshs. 12 each (nominal value Tshs. 10, premium Tshs. 2).

$$\begin{align*} \text{Bank Account} &\quad \text{Dr.} & \text{Tshs. } 6,000 \\ \text{To Ordinary Share Capital Account} &\quad \text{Cr.} & \text{Tshs. } 5,000 \\ \text{To Share Premium Account} &\quad \text{Cr.} & \text{Tshs. } 1,000 \\ \end{align*}$$

(Being issue of 500 ordinary shares at Tshs. 12 each for redemption purposes)

The 8% redeemable preference shares (nominal value Tshs. 6,000) are redeemed at a premium of 5%.
Premium on redemption $= 5\% \times \text{Tshs. } 6,000 = \text{Tshs. } 300$.
Total amount payable to preference shareholders $= \text{Tshs. } 6,000 + \text{Tshs. } 300 = \text{Tshs. } 6,300$.

\begin{align*} \text{8% Redeemable Preference Share Capital Account} &\quad \text{Dr.} & \text{Tshs. } 6,000 \\ \text{Premium on Redemption of Preference Shares Account} &\quad \text{Dr.} & \text{Tshs. } 300 \\ \text{To Preference Shareholders Account} &\quad \text{Cr.} & \text{Tshs. } 6,300 \\ \end{align*}

(Being preference shares made due for redemption at a premium of 5%)

The premium on redemption is written off from the Share Premium Account.

$$\begin{align*} \text{Share Premium Account} &\quad \text{Dr.} & \text{Tshs. } 300 \\ \text{To Premium on Redemption of Preference Shares Account} &\quad \text{Cr.} & \text{Tshs. } 300 \\ \end{align*}$$

(Being premium on redemption written off from Share Premium Account)

The nominal value of preference shares redeemed is Tshs. 6,000. New shares issued cover Tshs. 5,000. The remaining Tshs. 1,000 must be transferred from distributable profits (P&L A/c) to CRR.

$$\begin{align*} \text{Profit and Loss Account} &\quad \text{Dr.} & \text{Tshs. } 1,000 \\ \text{To Capital Redemption Reserve Account} &\quad \text{Cr.} & \text{Tshs. } 1,000 \\ \end{align*}$$

(Being transfer of nominal value of preference shares redeemed (not covered by new issue) to CRR)

The total amount due to preference shareholders is paid.

$$\begin{align*} \text{Preference Shareholders Account} &\quad \text{Dr.} & \text{Tshs. } 6,300 \\ \text{To Bank Account} &\quad \text{Cr.} & \text{Tshs. } 6,300 \\ \end{align*}$$

(Being payment made to preference shareholders)