VRV Co. Ltd. resolved to write off one-half of its subscribed capital by reducing each Rs.100 share, both preference & equity to Rs.50 fully paid up and to reduce the book figures of its assets by an equivalent amount by wiping out the goodwill and the debit balance of P&L A/c and by writing down land and building by Rs.75,000; plant & machinery by Rs.50,000 and providing the balance for bad debts.
The balance sheet of the company before the reduction of capital is as follows:
|
Liabilities |
Assets |
||
|
Authorized |
Goodwill |
5,00,000 |
|
|
Capital: |
Land & Buildings |
5,50,000 |
|
|
15,000 Preference |
15,00,000 |
Plant & |
4,50,000 |
|
Shares of Rs.100 |
Machinery |
||
|
Each |
Stock |
4,00,000 |
|
|
25,000 Equity |
25,00,000 |
Sundry Debtors |
4,50,000 |
|
Shares of Rs. 100 |
Cash |
50,000 |
|
|
Each |
Profit & Loss A/c |
6,00,000 |
|
|
40,00,000 |
|||
|
Subscribed |
|||
|
Capital: |
|||
|
10,000 Pref. |
10,00,000 |
||
|
Shares of Rs.100 |
|||
|
Each |
|||
|
15,000 Equity |
15,00,000 |
||
|
Shares of Rs. 100 |
|||
|
Each |
|||
|
Sundry Creditors |
5,00,000 |
||
|
30,00,000 |
30,00,000 |
Pass journal entries to give effect to the above resolution, showing the new balance sheet of the company.