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Internal Reconstruction

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A001AADITYA MALIK
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87 views7 pages

Internal Reconstruction

Uploaded by

A001AADITYA MALIK
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TINTERNAL =RECONETRUCTZOV PRACTICE. QUESTIONS The summarised Balance Sheet of M/s KETAN LTD. as on 3tst December, 2012 is as under 410% Preference shares of ‘Goodwill 2,00,000 10 each Land & Building +0,00,000 Equity Shares of € 10 each Furniture 1,28,000 10% Convertible Debentures ivestments, 4,00,000 ‘of 7 100 each Stock 280,000 Bank Overdraft Debtors 220,000, ‘Sundry Creditors, Bills Receivable (Trade) “25,000 Bills Payablo Profit and Loss Account 4,20,000 Provision for Tax ‘The scheme of reconstruction as approved by the court was as under (1) Each existing Equity share will be written down from 10 to 4, (2) Each existing 10% Preference share is to be witten down trom € 10 to 8 of which € 4 will be represented by 12% Preference share and 4 by Equity share. (3) Each convertible debenture is to be exchanged for @ 50 of non-convartibla 10% debentures, 2 35 of 12% Preference shares and & 15 of Equity shares, (4) The 1DBI has agreed to apply for & 5,00,000 of Equity shares paying cash in full on application. (5) The reduction of capital and reserves are tobe applied in eliminating ficttious assets and balance to be used in writing down the Land and Building and Investments in the ratio of 3: 1 Give journal entries regarding reduction, prepare Capital Reduction Account and resulting summarised Balance Sheet as on 1-1-2013 Following is the Summary Balance Sheet of Paramount Ltd. as on 31-03-2012 Liabilities: © | Assets z ‘Share Capital : Fixed Assets 6,000 - 8% Preference shares of Goodwill 60,000 7100 each 6,00,000] Patents & Trade Marks 40,000 50,000 Equity Shares of € 10 each | 5,00,000] Building 3,00,000 Reserves & Surplus : Plant & Machinery 3,00,000 Capital Reserves 50,000] Furniture 1,00,000 Secured Loans Current Assets 5% Debentures of € 100 each 3,00,000| Stock 41,50,000 Debentures interest Due '50,000| Sundry Debtors "75,000 Current Liabilities : Bank 4,00,000 Sundry Creditors 1,80,000] Cash "25,000 Misc. Expenditure not wio : Discount on Debentures 30,000 Profit & Loss Account 5,00,000 [16,80,000} 15,80,000 Note : Preference dividend is in arrears for three years. The following scheme of reconstruction was prepared and duly approved by the court (1 Tha Preference Shares shall be converted into equal Number at 9% Preterence Shares of ® 50 (2) The equity shares shall be reduced to % 3 each. However the face value will remain the same. (3) 5% Debentures shall be converted into equal number of 6% Debentures of 2 75 each. The

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