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Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

II. INTERNAL RECONSTRUCTION

Problem 1] The following is the Balance Sheet of Sai Ltd. as on 31-3-


2011 :

Liabilities Rs. Assets Rs.


Share Capital : Goodwill 70,000
4,000 Eq. shares of 4,00,000 L & Buildings 1,50,000
Rs.100 each
8% Pref. Shares of Rs. 3,00,000 P & Machinery 3,50,000
100 each
Profit Prior to 10,000 Patents 20,000
Incorporation
4% Debentures 3,00,000 Stock 3,20,000
Sundry Creditors 2,00,000 Cash at bank 5,000
Preliminary Expenses 21,000
Profit and Loss A/c 2,74,000
12,10,00 12,10,000
0

The following scheme of reconstruction was approved :


1) 8% Pref.shares be converted into 9% Pref. share, the amount being
reduced by 30%.
2) Equity share be reduced to fully paid share of Rs. 50 each.
3) L&Building be appreciated be 20%.
4) The Debenture Holders are agreeable to have their claims reduced by
20%.
5) All intangible assets including patents written off, utilize share premium
if necessary.
Pass the journal entries in the books of Sai Ltd.and draw Balance sheet.
[Apr.13, Mar.03, Oct.97]

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Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

Problem 2] The following is the Balance Sheet of Insolvent Ltd. as on


31.3.2006 :

Liabilities Amount Assets Amount


(Rs.) (Rs.)
Share Capital -- Goodwill 15,000
5% 2000 Cumulative Freehold property 2,00,000
Pref.
Shares of Rs. 100 2,00,000 Plant and Machinery 3,00,000
each
4000 Equity Shares Stock in Trade 50,000
of
Rs. 100 each 4,00,000 Debtors 40,000
6% Mortgage 1,00,000 Profit and Loss A/c 2,40,000
Debentures
Bank Overdraft 50,000 Cash 5,000
Creditors 1,00,000
8,50,000 8,50,000

The company got the following scheme of capital reduction approved by the
Court :
(1) The preference share to be reduced to Rs. 75 per share fully paid up
and Equity shares to Rs. 40 fully paid up.
(2) The debentureholders took over the stock-in-trade and the Book Debts
in full satisfaction of the amount due to them.
(3) The Goodwill A/c is to be eliminated.
(4) The Freehold Property is to be increased by 30%.
(5) The value of Plant and Machinery to be depreciated by 33 1/3 %
(6) The Expenses of Reconstruction amounted to Rs. 3,000.
Give the journal entries to record the above transactions and prepare
the revised Balance Sheet as on 31.3.2006
[ Oct.,2012, 06]

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Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

Problem 3] The following was the Balance Sheet of Navin Ltd. as on


31.3.2011
Balance Sheet as on 31st March, 2011
Liabilities Rs. Assets Rs.
Share Capital : Freehold Property 23,75,000
15,000 7% Plant & Machinery 8,00,000
Cumulative
Preference Goodwill 3,00,000
Shares of
Rs. 100 each 15,00,000 Stock 3,50,000
2,75,000 Eq. Shares Debtors 2,25,000
of
Rs. 10 each 27,50,000 Preliminary Exp. 2,50,000
Share Premium A/c 4,00,000 Profit & Loss A/c 7,50,000
Sundry Credtors 4,00,000
50,50,000 50,50,000
The following scheme of reconstruction was approved and duly sanctioned :
(a) Preference shares to be reduced to Rs. 80 per share.
(b) Equity shares to be reduced to Rs. 5 per share.
(c) Write off all intangible assets and share premium account.
(d) Freehold property to be written down to Rs. 18,50,000
Give necessary journal entries to record the above transactions in the books
of Navin Ltd. Also prepare a Revised Balance after the scheme of
reconstruction as on 31.3.2011
[Mar.12, Oct.10,Apr96]

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Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

Problem 4] The following is the Balance Sheet of Ajantha Ltd. as on


31.3.2011 :

Liabilites Rs. Assets Rs.


Shares Capital Goodwill 50,000
1,500 6% Preference Leasehold Property (at 80,000
cost)
shares of Rs. 100 1,50,000 Plant & Machinery(at 2,10,000
each cost)
2,000 Equity shares of Debtors 30,200
Rs. 100 2,00,000 Stock in Trade 79,175
each
Capital Reserve 36,000 Preliminary Expenses 7,250
Creditors 42,500 Profit & Loss A/c 1,10,375
Bank Overdraft 51,000
Depreciation provision
Leasehold Property 30,000
Plant & Machinery 57,500
5,67,000 5,67,000

The approval of the court was obtained for the following scheme of
reduction of capital :
(1) The Preference shares to be reduced to Rs. 50 per share.
(2) The Equity shares to be reduced to Rs. 12.50 per share.
(3) The Balance in Capital Reserve A/c should not be utilized.
(4) Plant & Machinery to be written down to Rs. 75,000.
(5) The P&L A/c balance and all intangible assets including
preliminary expenses to be written off.
Pass journal entries in the books of Ajantha Ltd. and give its Balance
Sheet after reconstruction
[Oct.,2011,May 98, May 97]

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Problem 5] Onida Ltd presents you with the following Balance Sheet as on
31.3.2011

Liabilities Amount Assets Amount


Share Capital Goodwill 30,000
Equity Shares of Rs. Land & Building 75,000
100 each
fully paid 2,00,000 Plant & Machinery 1,50,000
7% Preference Shares Patents 15,000
of
Rs. 100 each 1,50,000 Stock 1,10,000
Profit Prior to 5,000 Sundry Debtors 75,000
Incorporation
6% Debentures 1,50,000 Cash 2,500
Sundry Creditors 1,00,000 Preliminary Expenses 12,500
Profit & Loss A/c 1,35,000
6,05,000 6,05,000

The following scheme of reconstruction was duly approved. :


(1) 7% Preference shares be converted into 9% preference shares, the
amount being reduced by 30%
(2) Equity shares be reduced to fully paid shares of Rs. 50 each.
(3) Land and Building be appreciated by 20%
(4) Debentures be reduced by 20%
(5) All intangible assets and fictitious assets including patents be written
off. Utilise profit prior to incorporation if necessary.
(6) Equity shareholders to subscribe equity shares of Rs. 50,000. The
amount to be utilised for acquiring new Plant & Machinery.

Give necessary Journal entries in the books of Onida Ltd. and prepare the
revised Bal.Sheet.
[March 2011, Mar.2007 Oct. 1999 & 97 ]

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Problem 6] The following is the Balance Sheet of Omkar Ltd. as at 31 st


March, 2009:
Balance Sheet as on 31-3-2009
Liabilities Rs. Assets Rs.
4,000 5% Cumulative Goodwill 1,30,000
Preference shares Land and Building 4,00,000
Of Rs.100 each 4,00,000 Plant and Machinery 6,00,000
8, 000 Equity shares Patents 80,000
of
Rs. 100 each 8,00,000 Stock 1,00,000
6% Mortgage Debtors 80,000
Debentures 2,00,000 Profit & Loss A/c 2,00,000
Bank overdraft 1,00,000 Preliminary expenses 1,00,000
Sundry Creditors 2,00,000 Cash 10,000
17,00,000 17,00,000

The company got the following scheme of capital reduction approved by


the court:
1) The preference shares to be reduced to Rs. 60 per share fully paid
up and equity shares to Rs. 40 per share fully paid up.
2) The debentureholders took over the stock and book debts in full
satisfaction of the amount due to them.
3) The Land & Building to be increased by 25%.
4) The Plant and Machinery to be depreciated by 30%.
5) The expenses of reconstruction amounted to Rs. 10, 000.
6) Write off all intangible and fictitious assets and losses.
Pass Journal Entries for the above transactions and prepare the revised
Balance sheet.
[ Oct.,09]

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Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

Problem 7] The following was the Balance Sheet of Nisarg Ltd. as on 31st
March, 2009 :

Balance Sheet as on 31st March, 2009


Liabilities Amount Assets Amount
4000 equity shares Goodwill 50,000
of Rs. 4,00,000 Land & Building 1,40,000
100 each
2000 , 7% Plant & Machinery 1,50,000
Preference
shares of Rs. 2,00,000 Patent rights 40,000
100 each
6% Debentures 2,00,000 Stock 1,60,000
Sundry Creditors 1,60,000 Debtors 2,15,000
Bills Payable 40,000 Cash in hand 5,000
Preliminary 25,000
Expenses
Discount on issue
of
debenture 15,000
Profit & Loss 2,00,000
Account
Total 10,00,000 Total 10,00,000

The following scheme of reconstruction was duly approved :


(a) Equity shares are to be reduced to equal number of fully paid shares
of Rs. 50 each.
(b) 7% Pref. shares are to be reduced by 30% and the rate of dividend
increased to 9%.
(c) The value of land & building to be increased by 10% .
(d) The debentures are to be reduced by 20%
(e) All intangible, nominal and fictitious assets are to be eliminated and
balance used to write off patents.
(f) Further equity shares are to be issued for Rs. 50,000 for cash.

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Pass necessary journal entries in the books of Nisarg Ltd. and


prepare its Balance Sheet after reconstruction [March, 2009]

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Problem 8] The following was the Balance Sheet of XYZ Ltd. As on 31 st


December, 2007. :

Balance Sheet as on 31st December, 2007


Liabilities Rs. Assets Rs.
Share Capital : Land and 35,62,500
22,500 7% Cum. Building 12,00,000
Preference shares of Rs. 22,50,000 Plant and 4,50,000
100 each 4,12,500 Equity 41,25,000 machinery 5,25,000
shares of Rs. 10 each 6,00,00 Goodwill 3,37,000
Share Premium A/c 4,00,00 Stock 3,75,000
Sundry creditors 2,00,000 Debtors 11,25,000
Bills Payable Preliminary
expenses
Profit & Loss A/c
75,75,000 75,75,000

The following scheme of reconstruction was approved and duly


sanctioned :
1. Preference shares to be reduced to Rs. 80 per shared fully paid up.
2. Equity shares to be reduced to Rs. 5 per share fully paid up.
3. Dividend on preference shares was in arrears as from 1st January,
2005. One equity share of Rs. 5 each to be issued for Rs. 10 of
gross preference dividend in arrears.
4. Land and Building to be writtend own to Rs. 27,75,000.
5. Write off share premium A/c, Goodwill, Preliminary Expenses and
Profit and Loss A/c completely.
Pass necessary journal entries and prepare revised Balance Sheet.
[Oct., 2008]

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Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

Problem 9] The following is the Balance Sheet as on 31.3.2006 :

Liabilities Rs. Assets Rs.


Share Capital Goodwill 1,20,000
10% Preference share of Land & Building 60,000
Rs.100
Each fully paid 60,000 Plant & Machinery 7,20,000
Equity shares of Rs. 10 Stock 12,00,000
each
Fully paid 4,20,000 Debtors 6,00,000
8% Debentures 1,80,000 Cash at Bank 3,00,000
Sundry Creditors 15,00,000 Profit & Loss A/c 1,80,000
Bills Payable 8,40,000
Provision for taxation 1,80,000
31,80,000 31,80,000
The following scheme of reconstruction is sanctioned :
(1) All existing equity shares are reduced to Rs. 5 each fully paid up.
(2) All preference shares are reduced to Rs. 75 each fully paid up.
(3) Sundry creditors of the company decided to forego 50% of the claims
and they are
allotted 60,000 equity shares of Rs. 5 each in part satisfaction of the
balcne of claim.
(4) The 8% debentures of Rs. 100 each have to be converted into 10%
debentures
of Rs. 75 each.
(5) Goodwill and Profit & Loss A/c (Dr. Balance) should be completely
written off and
other assets to be reduced as follows :
(a) Plant and Machinery by Rs. 1,80,000
(b) Stock by Rs. 4,20,000.
(c) Reserve for doubtful debts to be made at 10% on Debtors.
(6) Taxation liability has been assessed at Rs. 2,40,000.
Pass journal entries and show B/ Sheet of Bharati Ltd. After giving the
effect to the above.

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Problem 10] Given below is the Balance Sheet of Hopeful Ltd. as on


31.3.2007 :

Liabilities Rs. Assets Rs.


Share Capital Goodwill 50,000
Authorised and issued : Lease hold property 50,000
1500 6% cumulative Pref. Plant & Machinery 1,52,500
Share
of Rs. 100 each 1,50,000 Stock 79,175
Debtors 30,200
2000 Eq. Shares of Rs. 2,00,000 Preliminary Expenses 7,250
100 each
Capital Reserve 36,000 Profit & Loss A/c 1,10,375
Trade Creditors 42,500
Bank Overdraft 51,000
4,79,500 4,79,500

The company had experienced trading difficulties, decided to re-organise its


finances. The approval of the court was obtained for the following sheme
for reduction of capital. :
(1) All preference shares to be reduced to Rs. 75 per share fully paid up.
(2) All equity shares to be reduced to Rs. 12.50 per share fully paid up.
(3) One Rs. 12.50 equity share to be issued for each Rs. 100 of Gross
Preference
Dividend Arrears, the Preference Dividend has not been paid for
three years.
(4) The balance in capital reserve account to be utilized.
(5) Plant and Machinery to be written – down to Rs. 75,000.
(6) The Profit and Loss A/c balance and all intangible assets to be written
off.
The company passed another resolution for resotring the total
authroised capital top Rs. 3,50,000 consisting of 1500, 6% cumulative
preference share of Rs. 75 each and the balance in equity shares of Rs.

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12.5 each. As soon as the above resolution had been passed, 5000 equity
shares were issued at par, for cash , payable in full upon application . the
same were fully subscribed and paid.
You are required :
(i) To pass journal entries to record the above transactions in the books of
company.
(ii) To prepare the Balance Sheet of the company after completion of the
scheme.
(Oct. 2007)

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Problem 11] Vanita Ltd. presents you the following Balance Sheet as on
31.3.2005 :

Liabilities Rs. Assets Rs.


Share Capital Goodwill 1,20,000
Equity Shares of Rs.100 Building 3,00,000
each
fully paid 8,00,000 Machinery 6,00,000
7% Pref. Shares of Rs. Patents 60,000
100 each
fully paid 6,00,000 Stock 4,40,000
Profit prior to incorporation 20,000 Debtors 3,00,000
6% Debentures 6,00,000 Cash 10,000
Creditors 4,00,000 Preliminary Exp. 50,000
Profit & Loss 5,40,000
24,20,00 24,20,000
0

The following scheme of reconstruction was duly approved by the Court :


(1) 7% Pref. Shares to be converted into 9% Pref. Shares, the amount being
reduced by 30%.
(2) Equity Shares to be reduced to fully paid shares of Rs. 50 each.
(3) Building be appreciated by 20%.
(4) Debentures be reduced by 20%
(5) All intangible assets and fictitious amounts including patents be written
off.
Utilise profit prior to incorporation if necessary.
Pass journal entries to record the above scheme of reconstruction.
(Oct.,2005)

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Problem 12] The Balance Sheet of Manish Ltd. as on 31 st March, 2005 was
as follows :

Liabilities Rs. Assets Rs.


Equity Shares of Rs. 10 11,00,000 Premises at cost 12,00,000
each
7% Cumulative preference 6,00,000 Machinery at cost 4,00,000
shares of Rs. 100 each
Share Premium 1,60,000 Goodwill 1,20,000
Creditors 1,60,000 Stock in trade 1,40,000
Depreciation Fund Debtors 90,000
Premises 2,50,000 Preliminary expenses 1,00,000
Machinery 80,000 Profit and Loss A/c 3,00,000
23,50,000 23,50,000

The following scheme of reconstruction was approved :


a) Eq. Shares to be reduced to Rs.5 each and Pref. shares to be
reduced to Rs.85 each
b) Write off share premium account.
c) One equity share of Rs. 5 each to be issued for Rs. 10 of gross
preference share dividend arrears, which was in arrears for last four
years.
d) Premises to be written down upto Rs. 7,65,000
You are required to give necessary journal entries in the books of Manish
Ltd. (April, 2005)

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Problem 13] The Balance Sheet of A Ltd. as on 31.3.2003 stands as under


:

Liabilities Rs. Assets Rs.


Capital Fixed Assets 14,30,000
Authorised Capital 10000 Stock in Trade 80,000
equity shares of Rs. 100 1,00,000 Sundry Debtors 30,000
each
Issued Capital : Investments 17,000
8,000 equity shares of Profit & Loss A/c 10,70,000
Rs. 100 each 8,00,000
8% Debentures 13,80,000
Creditors 4,50,000
Liability for income tax 10,000
26,40,000 26,40,000

The following scheme of reconstruction was approved :


(1) The equity share holders are prepared to have their capital reduced to
5% of their present holdings.
(2) The debenture holders are agreeable to have their claim reduced to
50% which is to be satisfied half by the issue of 7% debentures and
half by the issue of 8% preference shares of Rs. 100 each.
(3) The creditors are prepared to forego 20% of their dues in exchange for
equity shares of the like amount.
(4) The assets are to be reduced to the revalued figures : Fixed assets
Rs.11,00,000, Stock in trade Rs.50,000, Debtors Rs.20,000,
Investments Rs.7,000
Pass the journal entries in the books of A Ltd.
(April, 2004, Oct.2004)

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Problem 14] The following are the balance of Sandesh Ltd. as at 31 st


March, 2002 :

Particulars
Rs.
10,000 6% Cumulative Preference Shares of 1,00,000
Rs. 10 each
16,000 Equity Shares of Rs. 10 each 1,60,000
Share Premium Account 30,000
Creditors
26,000
Goodwill 10,000
Patents and Trade Marks 21,000
Freehold Property at cost 70,000
Depreciation thereon 14,000
Plant and Machinery at cost 1,40,000
Depreciation thereon 30,000
st
Stock on 31 March, 2002 24,000
Debtors 15,000
Profit and Loss A/c (Dr.) 55,000
Preliminary Expenses 25,000

A scheme for reduction of capital was passed by the court on the


following terms :
1] Preference Shares to be reduced to Rs. 9 per Share.
2] Equity shares to be reduced to Rs. 1.25 per share.
3] The share Premium A/c and Intangible Assets to be written off.
4] Plant and Machinery to be revalued at Rs. 50,000.
5] One Equity Share of Rs. 1.25 to be issued for each Rs. 10 gross
Preference
dividend arrears, which is in arrears for four years.
Give necessary journal entries in the books of Sandesh Ltd.
[ March 2002 ]

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Problem 15] The following is the Balance sheet of A Ltd. as on 31st March
1999.

Liabilities Amount Assets Amount


Share capital : Goodwill 1,20,000
8,000 shares of Rs. 100 8,00,000 Land & Building 4,30,000
each
6% Debentures 3,00,000 Plant & Machinery 3,70,000
Sundry creditors 80,000 Patents 50,000
Stock 80,000
Sundry Debtors 45,000
Cash in Hand 1,000
Profit & loss 84,000
11,80,000 11,80,000

The company is not getting well due to heavy losses and the following
scheme of reconstruction was accepted by all :
1) Each equity share shall be sub-divided into equity shares of Rs. 10
each.
2) After sub-division each equity shareholder will surrender 50% of his
shareholdings.
3) Debentureholders total claim be reduced to Rs. 1,80,000 and this
would be satisfied by issuing them the shares surrendered.
4) The claim of the Sundry Creditors shall be reduced by 20%
5) Out of the balance available, the company decided to write off
goodwill, profit and loss account and Patents completely and Plant and
Machinery by Rs. 2,25,000
6) Shares surrendered and not reissued shall be cancelled.
Pass necessary Journal Entries.
[March 2000 ]

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Problem 16) The Balance Sheet of Popular Co. Ltd. as on 31st Dec.1998
was as follows :

Liabilities Amount Assets Amount


8,000 Equity Shares of 8,00,000 Patents and Copyrights 1,00,000
Rs.100 each
2000 8% Debentures of 2,00,000 (at cost)
Rs.100
Outstanding Interest 16,000 Other Sundry Fixed 6,00,000
Assets
Sundry Creditors 72,000 P & L A/C 4,16,000
Provision for Income Tax 28,000
11,16,000 11,16,00
0
It was decided to reconstruct the Co. and following scheme was approved
by the court.
1) Each Equity Share be subdivided into fully paid Equity Share of Rs.10
each.
2) After sub-division, each shareholder shall surrender 50% of his holding to
the Co.
3) Out of the surrendered shares, 5,400 shares of Rs.10 each shall be
converted into preference shares of Rs.100 each fully paid.
4) The claim of the Debenture holders shall be reduced by 75% and in
consideration thereof the Debentureholders shall receive preference
shares to the value of 25% upon their claim
5) Creditor’s claims shall be reduced to 50% and to be settled by the issue
of Equity Shares of Rs.10 each out of the shares surrendered.
6) Patents and copyrights have no realisable value, be completely written off
along with the
P & L A/c debit Balance.
7) The shares surrendered but not reissued shall be cancelled.
Pass necessary Journal Entries. ( March 1999 )

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Problem 17] The Balance Sheet of Kolhapur Industries Ltd., on 31st Dec. 98
was as follows

Liabilities Amount Assets Amount


Share Capital : Goodwill 15,000
2000 6% Pref. Shares of 2,00,000 Freehold Property 2,00,000
Rs.100
4000 Equity Shares of 4,00,000 Plant & Machinery 3,00,000
Rs.100each
6% Mortgage Debentures 1,00,000 Stock 50,000
Bank Overdraft 75,000 Debtors 40,000
Creditors 75,000 Profit and Loss A/c 2,45,000
8,50,000 8,50,000

The Company got the following scheme of capital reduction approved by the
court :-
i) The Preference shares to be reduced to Rs.75 per share, fully paid-up
and the Equity Shares to Rs. 37.50.
ii) The Debenture holders took over the stock in trade and the book
debts in full satisfaction of the amount due to them.
iii) The Goodwill Account to be eliminated.
iv) Freehold Properties to be depreciated by 50%.
v) The value of the Plant and Machinery to be increased by Rs.50,000.
Give Journal Entries.

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Problem 18] The Balance Sheet of Vishal Ltd., on 31st Mar.1995 was as
follows

Liabilities Amount Assets Amount


Share Capital : Fixed Assets 4,62,000
5000 Equity Shares of Rs. Cash at Bank 3,20,000
50
each Rs. 30 paid 1,50,000 Profit and Loss A/c 5,48,000
7% First Debentures 4,00,000
7.5% Second Debentures 3,00,000
Unsecured Creditors 4,80,000
13,30,00 13,30,000
0

The following Scheme of reconstruction is proposed :

1) 7% First Debenture holders are to cancel Rs. 80,000 to advance Rs.


50,000 in cash and to take 8.5%. New First Debentures ( in cancellation
of those already issued ) for Rs. 3,70,000 in satisfaction of all their
claims.
2) 7.5% Second Debenture holders to accept Rs. 2,00,000 in cash in
satisfaction of all their claims.
3) Unsecured creditors are to accept the allotment of 12,000 shares of
Rs.10 each in satisfaction of their 60% claim and the balance of 40% is
to be postponed and to be payable at the end of four years.
4) Uncalled-up capital to be called-up and Rs. 40 per share cancelled thus
making the share of Rs.10 each.
Assuming the scheme is duly approved, give the necessary journal entries
and the Balance Sheet of the company after the scheme has been put into
effect.

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Problem 19] The position of K. Ltd. as on 31/3/1993 was as follows :-


Balance Sheet of K. Ltd.

Liabilities Amount Assets Amount


Share Capital : Goodwill 80,000
20,000 Eq. Shares of Rs.100 2,00,000 Land & Building 1,75,000
each
15,000 7% Pref. Shareof 1,50,000 Plant & Machinery 3,25,000
Rs10each
13,000 5% Pref. Shares of Patents & Designs 54,000
Rs.10
each, 65,000 Furniture & Fittings 15,000
Rs.5 paid
5% Debentures 1,50,000 Investments 75,000
4% Debentures 3,00,000 S. Debtors 4,15,000
Sundry Creditors 4,50,000 Cash at Bank 20,000
Interest Due on Debentures 19,500 P & L A/C 1,75,500
13,34,500 13,34,500

The following scheme of Reconstruction was submitted & approved by the


court.
a ) Equity Shares of Rs.10 each fully paid were reduced to Equity share of
Rs.10 each
Rs.5 paid up
b) 7% Pref. Shares of Rs.10 each fully paid were reduced to 6% Pref.
Share s of
Rs.10 each, Rs.6 paid per share.
c) 5% Pref. Shares of Rs.10 each Rs.5 paid per share, were reduced to
5% Pref. Shares of
Rs.10 each, Rs.3 paid per share.
In view of unsatisfactory state of affairs of the company debentures
holders agree to forego the interest due on Debentures. The company
meanwhile recovered as damages a sum of Rs. 45,000 from a third party.

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Haribhai V. Desai College. Google Classroom. S.Y.B.Com. 2019-20
Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

The reconstruction expenses were Rs. 2,250. The available fund from
the scheme is to be utilised in writing off P & L A/c. Reconstruction Exp.&
writing down Goodwill.
Pass journal entries & prepare Revised Balance sheet. ( April
1984 )

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Haribhai V. Desai College. Google Classroom. S.Y.B.Com. 2019-20
Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

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Haribhai V. Desai College. Google Classroom. S.Y.B.Com. 2019-20
Corporate Accounting Notes Compiled by Dr. Y. M. Mithare

Problem 20] The following is the Balance sheet of X Ltd. as on 31-12- 94.
Balance Sheet of X. Ltd.

Liabilities Amount Assets Amount


Share Capital : Land & Building 68,000
7,500 Equity Shares fully 75,000 Plant & Machinery 24,500
paid up
1,000 Pref. Shares of 50,000 Furniture & Fittings 15,125
Rs.50 each
Share Premium 10,000 Stock 21,050
5% Debentures 30,000 S. Debtors 30,378
Bank Overdraft 14,695 Patents 35,000
Bills Payable 13,938 Goodwill 10,000
Sundry Creditors 29,820 Cash at Bank 800
P & L A/C 18,600
2,23,45 2,23,453
3

Owing to heavy losses, the Co. decided to reduce its capital the following
scheme was sanctioned.
1) Eq. Shares to be reduced to Rs.5 each fully paid.
2) Pref. Share to be reduced to Rs. 50 each but credited with Rs. 25.
3) S. Creditors agreed to waived 10% of their claim.
4) Share Premium should be utilised for the purpose.
5) The amount so made available should be used to write off all intangible
assets and then 20% from Plant & Machinery 15% off Land & Building, 20%
Fixture & Fitting and balance to reduce patent
6) A call of Rs. 25 per share to be made on Pref. Shares & bank overdraft
should be paid off. Call money was received in full with the exception of Rs.
5,000 which was outstanding.
Pass necessary entries & prepare revised Balance Sheet.
( October 1983 )

*****

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