The following was the balance sheet of XYZ Ltd. as on 31 December 2010:
|
Liabilities |
Assets |
||
|
issued & Paid-up |
Goodwill |
60,000 |
|
|
Capital: |
Land & Buildings |
1,23,000 |
|
|
72,000 Shares of |
Machinery |
3,05,100 |
|
|
Rs. 10 Each |
Preliminary |
9,000 |
|
|
Rs. 7,20,000 |
Expenses |
||
|
Less:Calls-In- |
Stock |
61,650 |
|
|
Arrear Rs. 3 per |
Bank |
9,000 |
|
|
Share on 18,000 |
P&L A/c 1,32,000 |
||
|
Shares Rs. 54.000 |
6,66,000 |
||
|
Creditors |
92,550 |
Less: Net Profit |
|
|
Provision for Tax |
24,000 |
Profit of this Year |
|
|
7,200 |
1,24,800 |
||
|
7,82,550 |
7,82,550 |
Machinery value was Rs.60,000 in excess. It is proposed to write down this asset and to extinguish P&L A/c debit balance and to write off goodwill and preliminary expenses by the adoption of the following scheme:
- Forfeit the shares on which the calls are outstanding
- Reduce the paid-up capital by Rs.3 per share
- Re-issue the forfeited shares at Rs.5 per share
- Utilize the provision for tax, if necessary
You are required to draft the journal entries necessary and the balance sheet after carrying out the scheme.