The following is the Balance Sheet of X Ltd. as at 31 March 2011:
|
Liabilities |
Assets |
||
|
Share Capital |
Goodwill |
50,000 |
|
|
40,000 Equity Shares of 3100 Each |
40,00,000 |
Land & Buildings |
3,00,000 |
|
12% Debentures |
10,00,000 |
Plant & Machinery |
6,00,000 |
|
Outstanding Debentures Interest |
2,40,000 |
Furniture |
1,60,000 |
|
Creditors |
6,00,000 |
Stock |
5,40,000 |
|
Debtors |
1,20,000 |
||
|
Cash at Bank |
70,000 |
||
|
Preliminary Expenses |
40,000 |
||
|
Profit & Loss A/c |
39,60,000 |
||
|
58,40,000 |
58,40,000 |
The following scheme of reconstruction is executed:
- Equity shares are reduced by Rs.95 per share. They are then consolidated into 20,000 equity shares of Rs.10 each.
- Debenture holders agree to forego outstanding debenture interest. As a compensation, 12% debentures are converted into 14% debentures, the amount remaining Rs.10,00,000.
- Creditors are given the option to either accept 50% of their claim in cash in full settlement or to convert their claim into equity shares of Rs.10 each. Creditors for 4,00,000 opt for shares in satisfaction of their claims and the rest accepted cash.
- To make payment to creditors and to augment working capital, the company issued 1,00,000 equity shares of Rs.10 each at par, the entire amount being payable along with application. The issue was fully subscribed.
- Land and building are revalued at Rs.4,00,000; plant and machinery at Rs.4,20,000 and provision amounting to Rs.10,000 is made for doubtful debts. Pass journal entries to record the above.