The Balance Sheet of Nangu Ltd. as at 31st March, 2021 is as follows: Particulars (₹) I. EQUITY AND LIABILITIES (1) Shareholders' Funds (a) Share Capital Equity shares of ₹ 100 each 2,00,000 (b) Reserves and Surplus Stat

CS Executive · Company Accounts & Auditing Practices · PYQS · December 2021
The Balance Sheet of Nangu Ltd. as at 31st March, 2021 is as follows: Particulars (₹) I. EQUITY AND LIABILITIES (1) Shareholders' Funds (a) Share Capital Equity shares of ₹ 100 each 2,00,000 (b) Reserves and Surplus Statement of Profit and Loss (Debit) (97,000) (2) Non-Current Liabilities 6% Debentures 1,00,000 (3) Current Liabilities Trade creditors 50,000 Accrued Interest on Debentures 12,000 Total 2,65,000 II. ASSETS (1) Non-Current Assets (a) Tangible Fixed Assets Plant and Machinery 2,00,000 (2) Current Assets Stock-in-trade 50,000 Debtors 10,000 Cash at Bank 5,000 Total 2,65,000 The following scheme of re-construction was approved by the court: The shares were sub-divided into shares of ₹ 5 each and 90% of shares were surrendered. The total claim of debentureholders were reduced to ₹ 49,000 and in consideration of this they were also allotted out of the surrendered shares amounting to ₹ 25,000. The creditors agreed to reduce their claim to ₹ 20,000, 1/3 of (reduction) which was satisfied by issue of equity shares out of these surrendered shares. The shares surrendered but not re-issued were cancelled. Bad-debts to the extent of 10% of the total debtors would be provided for. The balance of Capital Reduction Account is to be applied for writing-off the losses and the balance if any is to be used in writing down the amount of Plant & Machinery and stock-in-trade proportionately. You are required to give the necessary Journal Entries and draft the Balance Sheet of Nangu Ltd. after reconstruction.

Answer & Explanation:

Journal of in the Books of Nangu Ltd Particulars ₹ ₹ Equity share capital (₹100) A/c Dr. 2,00,000 To Equity share capital (₹5) A/c 2,00,000 (sub-division of equity shares of ₹100 each into shares of ₹5 each) Equity share capital (₹5) A/c Dr. 180,000 To Surrendered share A/c 180,000 (Surrender of 90% of equity share of ₹5 each) 6% Debentures A/c Dr. 51,000 Accrued interest on debentures Dr. 12,000 To Capital Reduction A/c 63,000 (Reduction of the claim of debenture holders to ₹49000) Surrendered shares A/c Dr. 35,000 To Equity share capital (₹5) A/c 35,000 (allotment of equity shares of ₹25000 out of share surrendered to debenture holders and ₹10000 to sundry creditors) Sundry creditors A/c Dr. 30,000 To Capital Reduction A/c 30,000 (reduction of the claims of creditors from ₹50000 to ₹20000) Surrendered shares A/c Dr. 1,45,000 To capital reduction A/c 1,45,000 (Surrendered shares not issued cancelled) Capital reduction A/c Dr. 1,000 To provision for bad debts 1,000 (provision for bad-debts provided for) Capital reduction A/c Dr. 2,37,000 To Profit & Loss A/c 97,000 To Plant & Machinery 1,12,000 To Stock – in trade 28,000 (Utilization of capital reduction account in writing down the value of plant & Machinery, Stock and the debit balance of P & L A/c) Nangu Ltd. (and reduced) Balance Sheet (After Reconstruction) on 31st March, 2021 Particulars ₹ I. Equity & Liabilities (1) Shareholders fund (a) Share capital 11000 equity shares of ₹5 each fully pad 55,000 (2) Non-current liabilities 6% debentures 49,000 (3) Current liabilities creditors 20,000 Total 1,24,000 II. Assets (1) Non-current Assets (a) Tangible fixed assets Plant & Machinery 88000 (2) Current Assets Stock in trade 22,000 Debtors 10000 Less: provision for bad debts (1000) 9,000 Cash 5,000 Total 1,24,000

Topics: Internal Reconstruction

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic