Model: Sale of assets to settle debenture holders claim The following is the balance sheet of Devi Ltd. As at 31 March 2011:
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Liabilities |
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Assets |
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Share Capital: |
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Sundry Assets: |
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1,00,000 Equity Shares of Rs.10 Each Fully |
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10,00,000 |
Workmen”s |
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7,50,000 |
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Paid |
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Compensation |
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90,000 8% Preference Shares of 310 |
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9,00,000 |
Fund Investments |
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1,50,000 |
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Each Fully Paid |
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Property: |
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6% First Debentures |
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Delhi 8,00,000 |
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(Secured on Delhi Property) |
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1,50,000 |
Chennai |
6.00.000 |
14,00,000 |
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6% Second Debentures |
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P&L A/c |
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2,00,000 |
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(Secured on Chennai Property |
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1,75,000 |
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Workmen”s Compensation |
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Delhi 1,00,000 |
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Chennai |
50.000 |
1,50,000 |
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Creditors |
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1,25,000 |
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25,00,000 |
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25,00,000 |
The following reconstruction scheme was duly sanctioned by Court:
- Equity shares were to be reduced to Rs.1 each.
- Preference shares were to be reduced to Rs.8 each.
- Debenture holders to forego their interest ofRs.26,000, which is included among sundry creditors.
- Second debenture holders agreed to take over Chennai property atRs.2,50,000, accept an allotment of 15,000 Re 1 equity shares at par, and upon their forming a company called Roses Ltd.. to take over the Chennai property, they allotted Devi Ltd. 9,000 shares of Rs.10 fully paid at par.
- The Chennai workmen’s compensation disclosed the fact that there were liabilities to the extent of Rs.10,000. The investments pertaining to it were sold at a profit of 10% on book value and the liability was paid.
- Sundry assets were to be written down by Rs.4,00,000.
Show the journal entries to give effect to the above and prepare the reconstructed balance sheet.