Page 118 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 6: External Reconstruction of Companies

! notes
Caution Under net Assets Method and Lump Sum Method based on the information in the
problem the mode of discharge must be ascertained.
Illustration 1
On 1 April, 2010 the Balance Sheet of Raman & Company Limited was as under:
st
liabilities ` assets `
Authorised & Issued Capital
12,000, 7% Cumulative
Preference shares of ` 25
each fully paid 3, 00,000 Goodwill 4, 00,000
32,000 Equity shares of
` 50 each fully paid 16, 00,000 Fixed Assets 10, 00,000
6% Debentures 2, 00,000 Cash 40,000
Creditors 1, 00,000 Profit and Loss A/c 7, 60,000
22, 00,000 22, 00,000
The preference dividends were in arrears for two years. A scheme of reconstruction agreed upon
was as under: (1) A new company was to be formed, called Raman Co. (2011) Limited with an
authorised capital of ` 20,00,000 all in equity shares of ` 100 cash, (2) One equity share of ` 100
each fully paid in the new company to be issued in exchange of 3 preference shares in the old
company, (3) One equity share of ` 100 each fully paid in the new company to be exchanged
for 4 equity shares in the old company, (4) Arrears of preference dividend to be cancelled,
(5) Debenture-holders to receive 2,000 equity shares in the new company as fully paid, (6)
Creditors to be taken over by the new company and immediately paid off, (7) The new company
to issue remaining equity shares for public subscribed, (8) The new company to take over old
company’s assets subject to revolution of fixed assets at ` 10,60,000.
Prepare the necessary ledger accounts in the books of Raman & Company Limited and open the
books of the new company by means of journal entries, assuming that the public subscription
was fully responded.

Solution
calculation of purchase consideration by payment method
One Equity Share of ` 100 each for 3 Preference `
shares in the old company (12,000×1/3) = 4,000×100 4,00,000
One Equity Shares of ` 100 each for 4 Equity

shares in the old company (32,000×1/4) = 8000×100 8,00,000
Purchase Consideration 12, 00,000

ledger of raman & co. ltd.
realisation account
particulars ` particulars `
To Goodwill A/c 4, 00,000 By Creditors A/c 1, 00,000
To Fixed Assets A/c 10, 00,000 By 6% Debentures A/c 2, 00,000
To Cash A/c 40,000 By Raman & Co. (2011) Ltd. A/c 12, 00,000

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