The creditors and shareholders having agreed upon a scheme of reconstruction, A Ltd. went into voluntary liquidation. The balance sheet as at that date of reconstruction stood as follows:
|
Liabilities |
Assets |
||
|
Share Capital |
Building |
3,80,000 |
|
|
1,00,000 Equity |
10,00,000 |
Machinery |
4,20,000 |
|
Shares of Rs. 10 |
Stock |
2,00,000 |
|
|
Each |
Debtors |
2,40,000 |
|
|
5% Debentures |
4,00,000 |
Cash at Bank |
8,000 |
|
Trade Creditors |
1,60,000 |
Profit & Loss A/c |
3,12,000 |
|
15,60,000 |
15,60,000 |
The scheme of reconstruction provided as under:
- A new company called A New Ltd. to be formed with a share capital of Rs.20,00,000 in 2,00,000 shares of Rs.10 each to take over from the above company, stock and debtors at 20% less than the book value and building and machinery at Rs.3,08,000 and Rs.4,00,000, respectively.
- The shareholders agreed to receive 1,00,000 equity shares of Rs.10 each credited with Rs.5 per share paid up, with a call of Rs.2.50 per share to be made forthwith.
- The debenture holders were to be satisfied by the issue of 6% mortgage debentures of Rs.6,00,000 in the new company in exchange for old debentures.
- The trade creditors agreed to receive Rs.1,40,000 from the new company in full settlement of their claims.
- The bank balance was utilized in payment of reconstruction expenses.
Give the journal entries in the books of A Ltd. and A New Ltd.