The following scheme of reconstruction has been approved for Equity shareholders and Debenture holders of TP Ltd. (i) The Equity shareholders to…

CA Intermediate · Advanced Accounting · PYQS · September 2024
The following scheme of reconstruction has been approved for Equity shareholders and Debenture holders of TP Ltd. (i) The Equity shareholders to receive in lieu of their present holding of 1,50,000 shares of 10 each, the following : (1) For 50,000, equivalent cash (2) For 9,00,000, 10% debentures issued at premium of 20% (Face value of debenture is 100 each) (3) For balance - 5,50,000, Equity shareholders agreed to accept 50,000 equity shares of 10 each in full settlement. (ii) 8% Debenture - 5,00,000. Debenture holders agreed to accept Freehold property (Book value - 3,50,000) at a valuation of 4,45,000 in full settlement of their claim. Pass necessary Journal Entries in the Books of TP Ltd. for the above reconstruction. Narration for Journal entries is not required to be given.

Suggested Answer and Working Notes:

Journal Entries Particulars ₹ Equity Share Capital (old) A/c Dr. 15,00,000 To Equity Share Capital (10) A/c 5,00,000 To Cash A/c 50,000 To 10% Debentures A/c 7,50,000 To Securities premium 1,50,000 To Capital Reduction/Reconstruction A/c 50,000 (Being new equity shares, 8% Debentures issued, cash of 50,000 and the balance transferred to Reconstruction account as per the Scheme) 8% Debentures A/c Dr. 5,00,000 To Freehold Property A/c 4,45,000 To Capital Reduction/Reconstruction A/c 55,000 (Being the debenture holders claim settled partly and foregone partly as per reconstruction scheme) Capital Reduction/Reconstruction A/c Dr. 1,05,000 To Capital Reserves A/c 1,05,000 (Being balance in capital reduction account transferred to Capital Reserves A/c)

Topics: Accounting for Reconstruction of Companies

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