The balance sheet of Disappointed Ltd. as at 31 March 2011 is as follows:
|
Liabilities |
Assets |
||
|
Issued & |
Sundry Assets |
4,62,000 |
|
|
Subscribed |
|||
|
Capital: |
|||
|
24,000 Shares of |
2,40,000 |
Investments |
9,000 |
|
Rs. 10 Each Fully |
|||
|
Paid |
|||
|
Debentures |
P&L A/c |
3,21,000 |
|
|
4,02,000 |
|||
|
Add: Interest Due |
4,14,000 |
||
|
12,000 |
|||
|
Creditors: |
|||
|
Income Tax |
|||
|
3,000 |
|||
|
Others 1,35,000 |
1,38,000 |
||
|
7,92,000 |
7,92,000 |
The following reconstruction scheme is passed and duly sanctioned:
- Each share is to be sub-divided into ten fully paid equity shares of Rs.1 each.
- After such sub-division, each shareholder shall surrender to the company 95% of his holding, for the purpose of re-issue to debenture holders and creditors as far as necessary and the balance cancelled.
- Of these surrendered, 69,000 shares of Rs.1 each shall be converted into preference shares of Rs.1 each fully paid.
- The claim of debenture holders shall be reduced by 5/6th and in consideration thereof, the debenture holders shall receive preference shares to the value of one-sixth of their claim as at 31 March 2011.
- The income tax liability is to be paid in full, and claims of other creditors to be reduced to one-fifth of their claims to be satisfied by the issue of equity shares of Rs.1 each from the shares surrendered.
- The shares are surrendered and not re-issued to be cancelled. Set out journal entries and the resultant balance sheet assuming that the income tax liability is still outstanding and the amounts of the assets are unaltered.