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    Internal Reconstruction Problems

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    hanumanthaiahgowda
    The document discusses internal reconstruction schemes for three companies - S Ltd, Win Limited, and Parth Ltd. It provides details of the terms of each reconstruction scheme, including writing down asset values and issuing new shares. Journal entries are required to be made to record the reconstruction transactions for each company.

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    © All Rights Reserved
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    Internal Reconstruction Problems

    Uploaded by

    hanumanthaiahgowda
    27 views2 pages
    The document discusses internal reconstruction schemes for three companies - S Ltd, Win Limited, and Parth Ltd. It provides details of the terms of each reconstruction scheme, including writing down asset values and issuing new shares. Journal entries are required to be made to record the reconstruction transactions for each company.

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    © © All Rights Reserved

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    PDF, TXT or read online from Scribd

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    The document discusses internal reconstruction schemes for three companies - S Ltd, Win Limited, and Parth Ltd. It provides details of the terms of each reconstruction scheme, including writing down asset values and issuing new shares. Journal entries are required to be made to record the reconstruction transactions for each company.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    27 views2 pages

    Internal Reconstruction Problems

    Uploaded by

    hanumanthaiahgowda
    The document discusses internal reconstruction schemes for three companies - S Ltd, Win Limited, and Parth Ltd. It provides details of the terms of each reconstruction scheme, including writing down asset values and issuing new shares. Journal entries are required to be made to record the reconstruction transactions for each company.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Chapter - 3

    Internal Reconstruction
    Problems:

    1. S Ltd. resolved the following:

    1) To reduce ₹ 30,000 equity shares of 10 each to an equal number of shares of 7 each.

    2) To reduce ₹ 40,000, 8% preference shares of 10 each to an equal number of 10%


    preference shares of 4 each.

    3) To reduce 8% debentures of ₹ 1,00,000 to 10% debentures of 70,000.

    To utilise the amount available to write off Goodwill ₹ 1,00,000, Patents ₹ 80,000,
    preliminary expenses ₹ 50,000, profit and loss account debit balance ₹ 70,000 and write
    down plant and machinery to the extent possible. Give Journal entries

    2. The following scheme of reconstruction has been approved for Win Limited:

    (i) The shareholders to receive in lieu of their present holding at 1,00,000 shares of 10 each,
    the following:

    (a) New fully paid ₹ 10 Equity shares equal to 3/5th of their holding.
    (b) 10% Preference shares fully paid to the extent of 1/5th of the above new equity shares.
    (c) ₹40,000, 8% Debentures.

    (ii) An issue of ₹ 1 lakh 10% first debentures was made and allotted, payment for the same
    being received in cash forthwith.

    (iii) Goodwill which stood at ₹ 1,40,000 was completely written off.

    (iv) Plant and machinery which stood at ₹1,50,000. ₹ 2,00,000 was written down to
    (v) Freehold property which stood at ₹ 1,50,000 was written down by ₹ 50,000.

    You are required to draw up the necessary Journal entries in the Books of Win Limited for
    the above reconstruction. Suitable narrations to Journal entries should form part of your
    answer.

    3. Parth Ltd, had laid down the following terms upon the sanction of the reconstruction plan
    by the court-

    1). Furniture and Fixtures which stood at the books at ₹ 1,50,000 to be written down to ₹
    95,000. The freehold premises which was valued at ₹ 7,00,000 showed an appreciation of
    ₹55,000.

    2). Plant and machinery showed fall in value of ₹ 89,000, to be recorded in the books.
    Investment at ₹ 2,00,000 was brought down to the existing market value at ₹ 1,05,000.

    3). Debenture holders accepted to receive the following in lieu of their present 9%
    debentures of ₹ 2,50,000-

    a). 1/5th of the total to be paid in cash to them.

    b). To take over the land and buildings of value ₹ 72,000

    c). To forgo the remaining unpaid portion as a policy of reconstruction.

    Write off the profit and loss A/c debit balance at₹70,000 which had been accumulated over
    the years. In case of any shortfall, the balance of the General reserve of ₹ 1,50,000 can be
    utilized to write off the losses under reconstruction scheme.

    Show the necessary journal entries as part of the reconstruction process considering that
    balance in general reserve utilized to write off the losses as per reconstruction scheme.

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