Model: Issue of shares for arrears of preference dividend—Assets written down in proportion to written down values The following is the summarized balance sheet as on 31 March 2011:
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Liabilities |
Assets |
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|
Share Capital: |
Fixed Assets: |
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|
4,500 8% Cumulative Pref. Shares of |
4,50,000 |
Property at Cost |
3,30,000 |
|
|
Rs. 100 Each |
Less: Depreciation |
60000 |
2,70,000 |
|
|
6,000 Equity Shares of Rs. 100 Each |
6,00,000 |
Machinery at Cost |
6,60,000 |
|
|
Less: Depreciation |
120000 |
5,40,000 |
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|
6% Debenture |
1,50,000 |
Goodwill |
51,000 |
|
|
Debenture Interest outstanding |
9,000 |
Patents |
66,000 |
|
|
Securities Premium |
1,50,000 |
Current Assets: |
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|
Creditors |
60,000 |
Stock |
45,000 |
|
|
Debtors |
93,000 |
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|
Preliminary Expenses |
96,000 |
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|
P&L A/c |
2,57,400 |
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|
14,19,000 |
14,19,000 |
The following schemes of capital reduction were duly sanctioned by Court:
- Equity shares to be reduced by Rs.90 each
- Preference shares to be reduced to Rs.90 each
- The debenture holders to waive their right over outstanding interest
- One new equity share paid up to the extent of 50% only to be issued for each Rs.100 of gross preference dividend, which has not been declared since April 2009
- All credit balances not being the outside liabilities and all debt balances not being the amounts receivable as well as the intangible assets are to be written off
- Any balance available is to be utilized in writing down the fixed assets in proportion to their written down values.
You are required to give journal entries and balance sheet after the scheme of internal reconstruction is completed.