Model: Capital reduction A/c (Reconstruction or reorganization A/c)—Issue of new debentures The following scheme of reconstruction has been legally approved for Bhagya Ltd:
- In lieu of their present holding of 1,20,000 shares of Rs.10 each fully paid, the shareholders are to receive the following:
- Fully paid new equity shares equal to one-third of their holding
- 10% Preference shares fully paid to the extent of one-fifth of the above new equity shares
- 1,20,000, 10% secured debentures
- The debenture holders’ total claim of Rs.1,50,000 to be reduced to Rs.50,000. This will be satisfied by issue of 5,000 10% preference shares of Rs.10 each fully paid.
- An issue of Rs.1,00,000 5% first debentures was made and allotted, payment for the same having been received in cash.
- The goodwill which stood at Rs.6,00,000 was written down to Rs.1,00,000. Plant & machinery which stood at Rs.2,00,000 was written down to Rs.1,50,000.
- The freehold premises which stood at Rs.3,50,000 was written down by Rs.1,50,000.
Given the journal entries in the books of Bhagya Ltd. for the above reconstruction scheme.