Geetha and Shweta Ltd. had to pass to the hands of a receiver for debenture holders who held charge on all assets except uncalled capital. The following is the position as prepared by the receiver.
|
Share Capital: |
|
|
40,000 Shares of Rs.50 Each Fully Paid up |
20,00,000 |
|
2,00,000 Shares of Rs.50 Each, Rs.25 per Share Paid up |
50,00,000 |
|
First Debentures |
50,00,000 |
|
Second Debentures |
1,00,00,000 |
|
Unsecured Creditors |
80,00,000 |
|
Bank Balance |
60,00,000 |
|
Building, Plant & Machinery |
80,00,000 |
|
(Estimated to Realize Rs.30,00,000) |
The following is the interest of Geetha and Shweta in the company:
|
Geetha |
Shweta |
|
|
First Debentures |
40,00,000 |
10,00,000 |
|
Second Debentures |
60,00,000 |
40,00,000 |
|
Unsecured Creditors |
12,00,000 |
18,00,000 |
|
1,12,00,000 |
68,00,000 |
|
|
Share Capital: |
||
|
Fully Paid Shares |
10,00,000 |
10,00,000 |
|
Partly Paid Shares |
20,00,000 |
20,00,000 |
The following scheme of reconstruction is proposed:
- Geeta is to cancel Rs.62,00,000 of her total debt, pay cash Rs.10,00,000 and she would be issued Rs.60,00,000 first debentures in lieu of first and second debentures to be cancelled
- Shweta is to cancel her total debt by accepting Rs.10,00,000 in cash and 10,00,000 in first debentures
- Shweta is to surrender for cancellation of Rs.10,00,000 worth of fully paid-up shares
- Unsecured creditors, other than Geetha and Shweta, agree to reduce their debt by 20%, and accept in lieu there of 2,00,000 shares of Rs.10 each fully paid up and the balance in cash payable in five equal annual instalments
- Uncalled capital is to be called up in full and Rs.40 per share to be cancelled thus making shares of Rs.10 each
Assuming the scheme is duly approved by all parties interested and by the Court, show the reconstructed balance sheet and the journal entries in the books of the company.