The Balance Sheet of Radhika Ltd. as at 31-3-2024 is as follows: Particulars Notes ₹ Equity and Liabilities 1 Shareholders' funds a Share capital 1…

CA Intermediate · Advanced Accounting · MTP · May 2024
The Balance Sheet of Radhika Ltd. as at 31-3-2024 is as follows: Particulars Notes ₹ Equity and Liabilities 1 Shareholders' funds a Share capital 1 13,80,000 b Reserves and Surplus 2 (6,42,000) 2 Non-current liabilities a Long-term borrowings 3 4,50,000 3 Current liabilities a Trade Payables 3,60,000 b Short term borrowings - Bank Overdraft 2,34,000 c Other current liabilities 4 1,47,000 Total 19,29,000 Assets 1 Non-current assets a Property, plant and equipment 5 5,70,000 b Intangible assets 6 2,01,000 c Non-current investments 7 66,000 2 Current assets a Inventories 5,10,000 b Trade receivables 5,00,000 c Cash and Cash Equivalents 82,000 Total 19,29,000 Notes to accounts Particulars ₹ 1 Share Capital Equity share capital: 9,000 Equity Shares of 100 each 9,00,000 Preference share capital: 4,800 6% Cumulative Preference Shares of 100 each 4,80,000 13,80,000 2 Reserves and Surplus Debit balance of Profit and loss Account (6,42,000) 3 Long-term borrowings Secured: 6% Debentures 4,50,000 4 Other current liabilities Loan from directors 1,20,000 Interest payable on 6% debentures 27,000 1,47,000 5 Property Plant and Equipment Freehold property 5,10,000 Plant 60,000 5,70,000 6 Intangible assets Goodwill 1,56,000 Patents 45,000 2,01,000 7 Non-current investments Investments at cost 66,000 The Court approved a Scheme of re-organization to take effect on 1-4-2024, whereby: (1) Equity Shares to be reduced to 20 each. (2) Preference shareholders would give up 30% of their capital in exchange for allotment of 11% Debentures to them. (3) Of the Preference Share dividends which are in arrears for four years, three fourths to be waived and Equity Shares of 20 each to be allotted for the remaining quarter. (4) Interest payable on debentures to be paid in cash. (5) Goodwill to be written off. (6) Inventory to be written off by - 65,000. (7) Amount of 68,500 to be provided for bad debts. (8) Freehold property to be revalued at 6,49,000 (9) Investments be sold for 1,40,000. (10) Directors to accept settlement of their loans as to 90% thereof by allotment of equity shares of 20 each and as to 5% in cash, and balance 5% being waived. (11) There were capital commitments totaling - 2,50,000. These contracts are to be cancelled on payment of 5% of the contract price as a penalty. (12) Ignore taxation and cost of the scheme. (13) Eliminate debit balance of Profit and Loss A/c You are requested to prepare the Balance Sheet of the company after completion of the Scheme.

Suggested Answer and Working Notes:

Balance Sheet of Radhika Ltd. (and Reduced) as on 1.4.2024 Particulars Notes ₹ I. Equity & Liabilities A Shareholders' Fund a Share Capital 1 3,16,800 b Reserves & Surplus 2 1,10,200 B Non-Current Liabilities a Long Term Borrowings 3 7,86,000 C Current Liabilities a Trade Payables 3,60,000 b Short Term borrowings: Bank OD 2,34,000 Total 18,07,000 II. Assets A Non-Current Assets a Property, Plant & Equipment 4 7,09,000 b Intangible assets: Patents 45,000 B Current Assets a Inventory (5,10,000-65,000) 4,45,000 b Trade Receivable 5 4,31,500 c Cash & Cash Equivalent 1,76,500 Total 18,07,000 Notes to Accounts Particulars ₹ 1 Share Capital Authorised, Issued, Subscribed & Paid Up Capital Equity share Capital 15,840 Shares of 20Paid up 3,16,800 (Out of above 6,840 shares are issued for consideration other cash) (W.N 1) 2 Reserves & Surplus Capital Reserve (W.N 2) 1,10,200 3 Long Term Borrowings Secured 6% Debentures 4,50,000 a 11% Debentures (70% of 4,80,000 preference shares) 3,36,000 b 7,86,000 4 PPE Freehold property 6,49,000 Plant 60,000 7,09,000 5 Trade receivable Less: Provision for Doubtful Debts (68,500) 4,31,500 Working notes: 1. Computation of equity shares: Equity share capital No. of shares at 20 each 1 After the reduction to 20 each 90,000 x 20 1,80,000 9,000 2. Equity shares allotted to preference shareholders for their 1/4 arrears. 6% of 4,80,000 28,800 1,440 3. Equity shares allotted to Directors in settlement of their loan 90% of 1,20,000 1,08,000 5,400 Total equity shares 3,16,800 15,840 2. Calculation of capital reserve: Equity Share 7,20,000 + Preference share 1,44,000 + Freehold property 1,39,000 +Investment 74,000 + Director Loan 6,000 – Preference share dividend 28,800 – Goodwill 1,56,000 – Inventory 65,000 – Bad debts 68,500 – Profit & Loss A/c 6,42,000 = Capital Reserve 1,22,700 3. Cash balance: Particulars ₹ Cash & cash equivalent 82,000 Add: Investment sold 1,40,000 Less: Directors Loan (1,20,000 x 5%) 6,000 Penalty (2,50,000x 5%) 12,500 Interest on debentures (6% on 4,50,000) 27,000 45,500 1,76,500

Topics: Accounting for Reconstruction of Companies

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