The balance sheet of Rita Ltd. as on 31 March 2011 was as follows:
|
Liabilities |
Assets |
||
|
Share Capital: |
Goodwill |
15,000 |
|
|
issued & |
Land & Buildings |
75,000 |
|
|
Subscribed |
Plant & |
2,30,000 |
|
|
Capital: |
Machinery |
||
|
5,000 Pref. Shares |
5,00,000 |
Patents |
25,000 |
|
of Z 100 Each |
Stock |
1,48,000 |
|
|
Fully Paid |
Sundry Debtors |
2,52,000 |
|
|
7,500 Equity |
3,75,000 |
P&L A/c |
2,55,000 |
|
Shares of Z 50 |
|||
|
Each Fully Paid |
|||
|
Bank Loan |
22,000 |
||
|
Secured on Land |
|||
|
& Building |
|||
|
Sundry Creditors |
1,03,000 |
1,03,000 |
|
|
1,00,000 |
1,00,000 |
The preference share dividends are in arrears since 2007. The company passed a special resolution to reduce its capital and the following scheme was sanctioned by the Court.
- The preference shares to be reduced to Rs.75 each fully paid and the arrears of dividend to be cancelled.
- The equity shares to be reduced to Rs.25 each fully paid.
- The debit balance on P&L A/c and goodwill to be written off. Plant & machinery to be reduced by Rs.20,000; of the book debts, Rs.12,000 known to be bad to be written off, available balance to be used for writing down patents.
The chairman of the company agreed to advance the sum of Rs.50,000 to be secured by a mortgage at 5% p.a. on land & buildings. The cash is to be applied in paying off the bank loan and providing additional working capital.
Pass journal entries giving effect to the above scheme and prepare the revised balance sheet of the company.