The following is the summarised Balance Sheet of AB Ltd. as on 31st March, 2016: (a) There
Question:
The following is the summarised Balance Sheet of AB Ltd. as on 31st March, 2016:
(a) There is a contingent liability of ₹ 30,000.
(b) Preference shares are cumulative and dividends are in arrear for three years. A capital reduction scheme stating the following terms was duly approved:
(i) The preference shares to be reduced to ₹ 8 per share and the equity shares to 25 paise each and to be consolidated as shares of ₹ 10 each and Re 1 each fully paid respectively. The preference shareholders waive two-thirds of dividend arrear and receive equity shares for the balance. The authorised capital to be restored to ₹ 30,000 preference shares of ₹ 10 each and 6,00,000 equity shares of Re 1 each.
(ii) The shares in Subsidiary Ltd. are sold to an outside interest for ₹1,50,000.
(iii) All intangible assets are to be eliminated and bad debts of ₹12,000 and obsolete stock of ₹30,000 to be written off.
(iv) The debentureholders to take over one of company’s properties (book value ₹54,000) at a price of ₹60,000 in part satisfaction of the debentures and to provide further cash of ₹45,000 on a floating charge. The arrears of interest are paid.
(v) The contingent liability materialised in the sum stated but the company recovered ₹15,000 of these damages in action against one of its directors. This was debited to his loan account of ₹24,000, the balance of which was paid in cash on his resignation.
(vi) The remaining directors agreed to take equity shares in satisfaction of their loans. You are required to:
(i) Give the necessary Journal Entries including cash transactions;
(ii) Set out the revised Balance Sheet after giving effect to the foregoing entries.
Step by Step Answer:
Corporate Accounting As Per The Companies Act 2013 Including Rules 2014 And 2015
ISBN: 9789352605569
2nd Edition
Authors: M Hanif, A Mukherjee