As a part of the reconstruction scheme of Getting better Ltd, the following terms were agreed upon- The shareholders to receive in lieu of their…

CA Intermediate · Advanced Accounting · RTP · May 2024
As a part of the reconstruction scheme of Getting better Ltd, the following terms were agreed upon- The shareholders to receive in lieu of their present holdings (viz. 10,000 shares of 50 each), the following- 15,000 Fully paid equity shares of 10 each;12% fully paid preference shares to the extent of 2/5 of total equity shares;To pay them - 50,000 and transfer the remaining to the reconstruction account.8% Preference share capital -3,00,000 To write down the value of preference shares to 50 (original face value - 100).14% debentures of the nominal value of 2,00,000 along with accrued interest 56,000 was waived off for three fourths of the total amount, and the remaining being paid in cash. Show the necessary journal entries in the books of Getting better company based on the above scheme.

Suggested Answer and Working Notes:

Journal entries in the books of Getting better Co. Date Particulars Dr. ₹ Cr. ₹ Share capital A/c (50) Dr. 5,00,000 To Share capital A/c (10) 1,50,000 To 12% Preference share capital A/c 2,00,000 To Bank A/c 50,000 To Reconstruction A/c 1,00,000 (Being 15,000 equity shares of 10and 12% preference shares issued, paid in cash and remaining forgone as a part of Reconstruction Scheme dated...) Preference Share capital A/c (100) Dr. 3,00,000 To Preference share capital A/c (50) 1,50,000 To Reconstruction A/c 1,50,000 (Being the preference share capital reduced and forfeited as per reconstruction scheme) 14% Debenture A/c Dr. 2,00,000 Interest accrued on Debentures A/c Dr. 56,000 To Bank A/c 64,000 To Reconstruction A/c 1,92,000 (Being the debenture holders paid their interest and amount foregone as per reconstruction scheme) Reconstruction A/c Dr. 4,42,000 To Capital Reserve A/c 4,42,000 (Being the balance in reconstruction ac transferred to capital reserve as per reconstruction scheme)

Topics: Accounting for Reconstruction of Companies

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