MD & Co. is in the hands of a receiver for debenture holders. The following statement of affairs is prepared:
|
Assets |
Book |
Realizable |
|
|
Value |
Value |
|
|
||
|
Buildings |
20,00,000 |
24,00,000 |
|
Machinery |
40,00,000 |
16,00,000 |
|
Stock |
32,00,000 |
8,00,000 |
|
Debtors |
32,00,000 |
20,00,000 |
|
Cash |
4,00,000 |
4,00,000 |
|
|
1,28,00,000 |
72,00,000 |
|
Less: 6% First Mortgage |
|
= 40,00,000 |
|
Debentures |
|
|
|
|
|
= 32,00,000 |
|
Less: 7% Second Mortgage |
|
= 48,00,000 |
|
Debentures |
|
|
|
Deficiency Regarding |
|
= 16,00,000 |
|
Mortgage Debentures |
|
|
|
Less: Unsecured Creditors |
|
= 20,00,000 |
|
Deficiency Regarding |
|
= 36,00,000 |
|
Unsecured Creditors |
|
|
|
Less: Contributions aries: |
|
= |
|
2,00,000 Fully Paid |
|
|
|
Shares of Rs.10 Each |
|
|
|
20,00,000 |
|
|
|
2,00,000 Shares of |
|
|
|
Rs. 10 Each Rs.4 Paid up |
|
|
|
8,00,000 _________ |
|
28,00,000 |
|
Deficiency Regarding |
|
64,00,000 |
|
Contributories |
|
|
All the debentures are held by A and B. First mortgage debentures are held as Rs.24,00,000 and Rs.16,00,000 respectively by A and B. Second mortgage debentures are held as Rs.32,00,000 and Rs.16,00,000 by A and B, respectively.
In addition, Rs.8,00,000 of unsecured creditors are debts due to A and B for Rs.4,00,000 each. Further, fully paid 20,000 and 8,000 partly paid shares respectively under a scheme of reconstruction.
- Partly paid shares of Rs.10 are to be fully called up and all shares, except as shown in (iii) below, are to be reduced shares of Rsd.1 fully paid up.
- A will cancel all his dues including debentures, pay Rs.4,00,000 cash and will be issued new 8% first mortgage debentures of Rs.44,00,000.
- B will cancel all his dues and surrender all his shares and will be paid Rs.4,00,000 cash and new 8% first mortgage debentures of Rs.24,00,000.
- Balance of unsecured creditors will sacrifice 20% and will be compensated to the extent of 10% of original amount by issue of equity shares of Rs.1.
Pass the necessary journal entries and also draft the balance sheet after the scheme is put into operation.