Model: Interest of individuals in the company’s reconstruction scheme Having accumulated huge losses, Aries Ltd. adopts a scheme of reconstruction on 31 March 2011, on which date its balance sheet is as follows:
Balance Sheet of Aries Ltd. as on 31 March 2011
|
Liabilities |
Assets |
||
|
Share Capital: |
Fixed Assets: |
||
|
Authorized: |
Goodwill |
6,50,000 |
|
|
75,000 Equity Shares of 350 Each |
37,50,000 |
Plant |
5,00,000 |
|
Subscribed & Paid up: |
Computers |
12,50,000 |
|
|
25,000 Equity Shares of 350 Each |
12,50,000 |
Furniture |
1,00,000 |
|
50,000 Equity Shares of 350 Each |
Current Assets: |
||
|
Rs. 40 per Share Paid up |
20,00,000 |
Stock |
3,50,000 |
|
Secured Loans: |
Cash at Bank |
50,000 |
|
|
11.5% First Debentures |
2,50,000 |
Profit & Loss A/c |
13,50,000 |
|
12% Second Debentures |
5,00,000 |
||
|
Current Liabilities: |
|||
|
Sundry Creditors |
2,50,000 |
||
|
42,50,000 |
42,50,000 |
The following is the interest of Mr. X and Mr. Y in Aries Ltd.:
|
Mr.X (Rs.) |
Mr. Y (Rs.) |
|
|
11.5% First Debentures |
1,50,000 |
1,00,000 |
|
12% Second Debentures |
3,50,000 |
1,50,000 |
|
Sundry Creditors |
1,00,000 |
50,000 |
|
6,00,000 |
3,00,000 |
|
|
Fully Paid up Rs.50 Shares |
1,50,000 |
1,00,000 |
|
Fully Paid up Rs.40 Paid up |
2,50,000 |
2,50,000 |
The following scheme of reconstruction is approved by all parties interested and also by the Court:
- Uncalled capital is to be called up in full and such shares and also fully paid-up shares pertaining to the earlier issue be converted into equal number of fully paid-up equity shares of Rs.20 each
- Mr. X is to cancel Rs.3,50,000 of his total debt (other than share amount), is to pay Rs.1,00,000 to the company and to receive new 13% first debentures in full settlement
- Mr. Y is to cancel Rs.1,50,000 of his total debt (excluding shares) and to accept new 13% first debentures for the balance
- The amount thus rendered available by the scheme be utilized in writing off goodwill, the debit balance of P&L A/c and in reducing the book value of computers by Rs.7,50,000
You are required to pass the journal entries for all the above-mentioned transactions and prepare the initial balance sheet of the reconstructed company.