Page 120 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 6: External Reconstruction of Companies

Equity Shares App. & Allotment A/c Dr. 6,00,000 notes
To Equity Shares Capital A/c 6,00,000
(Being transfer of application and allotment money
into Capital A/c)

Creditors A/c Dr. 1,00,000
To Bank A/c 1,00,000
(Being payment of creditors)

Illustration 2
The Balance Sheet of Kapoor & Co. Ltd. was as follows:

as on 31 December, 2010
st
liabilities ` assets `
12,500, 7% Preference Patents 1, 22,500
shares of ` 20 each Buildings 3, 00,000
fully paid. 2, 50,000 Cash 2,500
15,000 equity shares of Debtors 60,000
` 20 each fully paid 3, 00,000 Stock 90,000
8% Debentures 50,000 Profit & Loss A/c 75,000
+ Interest 10,000 60,000
Creditors 40,000
6, 50,000 6, 50,000
The following scheme was passed and sanctioned: (i) Shastri Company Limited to be formed to
take over the business, (ii) One share of ` 10 fully paid in the new company to be issued for every
three equity shares in the old company, (iii) Three shares of ` 10 fully paid in the new company
to be issued for every five preference shares in the old company, (iv) Debenture-holders to be
paid in full by Shastri Ltd., (v) The creditors to receive 8% of the sums due to them in fully paid
shares of ` 10 in the new company in full settlement, (vi) Patents and Profits and Loss Account
to be written off, (vii) Arrears of preference dividend to be cleared by issuing one ` 10 fully paid
equity share in Shastri Ltd. for every twenty held, and (viii) Any balance available by the scheme
to be used in writing down buildings.
Give opening journal entries and prepare the initial Balance Sheet of Shastri Ltd.
Solution

calculation of purchase consideration by payment method
`
(i) One share of ` 10 for every 3 equity shares in the old company (15,000×1/3×10) 50,000
(ii) Three shares of ` 10 each for every five preference shares in the old
company (12,500×3/5×10)
75,000
(iii) Shares for creditors (40,000×80/100) 32,000
(iv) One equity share for every twenty shares to clear the preference
shares (12,500×1/20)×10 6,250

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