ZED Ltd. has the following position as on March 31, 2016: ₹ ₹ I EQUITY & LIABILITIES (1) Shareholder's Fund (a) Share Capital 1,00,000 Equity Shares of ₹10 each fully paid 10,00,000 (b) Reserves & Surpluses Profi

CS Executive · Company Accounts & Auditing Practices · PYQS · June 2017
ZED Ltd. has the following position as on March 31, 2016: ₹ ₹ I EQUITY & LIABILITIES (1) Shareholder's Fund (a) Share Capital 1,00,000 Equity Shares of ₹10 each fully paid 10,00,000 (b) Reserves & Surpluses Profit & Loss Account (5,00,000) 5,00,000 (2) Non-Current Liabilities 4,000 10% Debentures of ₹100 each 4,00,000 (3) Current Liabilities Interest on 10% Debentures Sundry Creditors 40,000 1,60,000 2,00,000 TOTAL LIABILITIES 11,00,000 II ASSETS (1) Non-Current Assets (i) Tangible Assets 9,00,000 (ii) Intangible Assets — Goodwill 2,00,000 11,00,000 TOTAL ASSETS 11,00,000 On the above date the Company has decided to reconstruct and the following resolutions are passed: The equity shares are to be subdivided into shares of ₹1 each and after subdivision each shareholder shall surrender 60% of his holding, which shall be immediately cancelled by the company. Debenture holders will reduce their claims by ₹1,40,000 and are settled by issue of 12% Debentures of ₹100 each. Creditors claims are to be reduced to ₹1,00,000 and are settled by issue of Equity shares of ₹1 each. Goodwill and Profit & Loss account debit balances are to be written off fully. Pass the necessary Journal entries to record the above and also prepare Balance Sheet of the company after reconstruction.

Answer & Explanation:

In books of Zed Ltd Journal Entries Particulars Amt. (Dr.) Amt. (Cr.) 1) Equity Share Capital @ ₹10 A/c Dr. 1,000,000 To Equity Share Capital @ ₹1 1,000,000 (Being equity shares subdivided) 2) Equity Share Capital A/c Dr. 600,000 To Capital Reduction A/c 600,000 (Being equity shares surrendered & cancelled) 3) 10% Debentures A/c Dr. 400,000 Interest on Debentures A/c Dr. 40,000 To 12% Debenture A/c 300,000 To Capital Reduction A/c 140,000 (Being claim of 10% Debentures settled) 4) Sundry Creditors A/c Dr. 160,000 To Equity Share Capital 100,000 To Capital Reduction A/c 60,000 (Being claim of Sundry Creditors settled) 5) Capital Reduction A/c Dr. 700,000 To Goodwill 200,000 To Profit and Loss account 500,000 (Being Goodwill, Profit and loss A/c written off) Capital Reduction A/c Dr. Rs. Cr. Rs. To Goodwill A/c 200,000 By Equity Share Capital A/c 600,000 To Profit and Loss A/c 500,000 By 10% Debentures A/c 140,000 To Capital Reserve A/c (B/F) 100,000 By Sundry Creditors A/c 60,000 800,000 800,000 Balance Sheet Note No. Rs. I Equity & Liabilities 1) Shareholders' Fund a) Share Capital 500,000 b) Reserve and Surpluses Capital Reserve 1,00,000 2) Non Current Liabilities 12% Debentures of ₹ 100 each 300,000 Total 900,000 II Assets 1) Non Current Assets i) Tangible Assets 900,000 Total 900,000

Topics: Internal Reconstruction

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