Following is the balance sheet of Tulika Ltd. as on 31st March, 2014: I. EQUITY AND LIABILITIES (1) Shareholders' funds (a) Share capital Authorised capital 20,000 equity shares of ₹10 each - ₹2,00,000 Issued, subscribed

CS Executive · Company Accounts & Auditing Practices · PYQS · June 2015
Following is the balance sheet of Tulika Ltd. as on 31st March, 2014: I. EQUITY AND LIABILITIES (1) Shareholders' funds (a) Share capital Authorised capital 20,000 equity shares of ₹10 each - ₹2,00,000 Issued, subscribed and paid-up capital 12,000 equity shares of ₹10 each - ₹1,20,000 Less: Calls in arrear (₹3 per share on 3,000 shares) - ₹9,000 Total Share Capital - ₹1,11,000 (b) Reserves and surplus Surplus as per last balance sheet (loss) - (₹22,000) Add: profit for the year - ₹1,200 Total Reserves and Surplus - (₹20,800) (2) Current liabilities (a) Trade payables - ₹15,425 (b) Other current liabilities (provision for taxes) - ₹4,000 TOTAL - ₹1,09,625 II. ASSETS (1) Non-current Assets (a) Fixed assets (i) Tangible assets Land and building - ₹20,500 Machinery - ₹50,850 (ii) Intangible assets Goodwill - ₹10,000 (2) Current Assets (a) Inventories - ₹10,275 (b) Trade receivables - ₹15,000 (c) Cash and cash equivalents - ₹1,500 (d) Other current assets (preliminary expenses) - ₹1,500 TOTAL - ₹1,09,625 The directors have found that the valuation of the machinery was overvalued by ₹10,000. It is proposed to write down these assets to its true value and to extinguish the deficiency in the statement of profit and loss and to write-off goodwill and preliminary expenses by adoption of the following schemes: (i) Forfeit the shares on which the calls are outstanding (ii) Reduce the paid-up capital by ₹3 per share (iii) Re-issue of forfeited shares at ₹5 per share (iv) Utilise the provision for taxes, if necessary The shares on which the calls were in arrear were duly forfeited and re-issued as fully paid-up shares of ₹7 each on payment of ₹5 per share. You are required to pass necessary journal entries.

Answer & Explanation:

Journal Entry Date Particulars Dr. Amount (₹) Cr. Amount (₹) (i) Equity Shares Capital A/c 30,000 To Calls in arrears 9,000 To Share Forfeiture A/c 21,000 (Being forfeiture of 3,000 equity shares of ₹10 each for nonpayment of call at ₹3 per share as per board resolution dated.....) (ii) Equity Shares Capital A/c 90,000 To Equity Share Capital A/c 63,000 To Reconstruction A/c 27,000 (Allotment of 9,000 fully paid equity of ₹7 each in lieu of 9,000 fully paid shares of ₹10 each as per scheme of reconstruction dated........) (iii) Bank A/c 15,000 Share Forfeiture A/c 6,000 To Equity Shares Capital A/c 21,000 (Re-issue of 3,000 equity shares of ₹7 each as fully paid up @ ₹5 per share) (iv) Share Forfeiture A/c 15,000 To Reconstruction A/c 15,000 (Transfer of balance of forfeited shares) (v) Provision for Taxation A/c 300 To Reconstruction A/c 300 (Transfer of Provision for taxes to the extent necessary) (vi) Reconstruction A/c 42,300 To Goodwill A/c 10,000 To Machinery A/c 10,000 To Preliminary Expenses A/c 1,500 To Profit and Loss A/c 20,800 (Transfer of balances as per Reconstruction scheme)

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