{"id":14937,"date":"2023-03-08T14:33:51","date_gmt":"2023-03-08T09:03:51","guid":{"rendered":"https:\/\/gstguntur.com\/?p=14937"},"modified":"2023-03-08T14:34:35","modified_gmt":"2023-03-08T09:04:35","slug":"internal-reconstruction-advanced-accounts-ca-inter-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/internal-reconstruction-advanced-accounts-ca-inter-study-material\/","title":{"rendered":"Internal Reconstruction \u2013 Advanced Accounts CA Inter Study Material"},"content":{"rendered":"

Internal Reconstruction \u2013 CA Inter Advanced Accounting Study Material<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Internal Reconstruction \u2013 CA Inter Advanced Accounting Study Material<\/h2>\n

Basic Questions<\/strong><\/p>\n

Question 1.
\nPass journal entries for the following transactions:<\/p>\n

    \n
  1. Conversion of 2 lakh fully paid equity shares of \u20b9 10 each into stock of \u20b9 1,00,000 and balance has 12% fully convertible Debenture.<\/li>\n
  2. Consolidation of 40 lakh fully paid equity shares of \u20b9 2.50 each into 10 lakh fully paid equity share of \u20b9 10 each.<\/li>\n
  3. Sub-division of 10 lakh fully paid 11% preference shares of \u20b9 50 each into 50 lakh fully paid 11% preference shares of \u20b9 10 each.<\/li>\n
  4. Conversion of 12% preference shares of \u20b9 5,00,000 into 14% preference shares \u20b9 3,00,000 and remaining balance as 12% Non-cumulative preference shares. (Nov. 2013) (4 Marks)<\/li>\n<\/ol>\n

    Answer:
    \nJournal Entries
    \n\"Internal<\/p>\n

    \"Internal<\/p>\n

    Question 2.
    \nPass Journal Entries in the following conditions:
    \n(1) Super Ltd. had 62,000 equity shares of \u20b9 50 each on which \u20b9 45 is paid up. In September, 2017 company decided to sub-divide each share into 5 shares of \u20b9 10 with \u20b9 9 paid up.<\/p>\n

    (2) Top Ltd. had 1,05,000 equity shares of \u20b9 10 each fully paid up. In November, 2017 company decided to convert the issued shares into stock. But in January 2018 the company re-converted the stock into equity shares of \u20b9 100 each fully paid up.<\/p>\n

    (3) New Ltd. had capital of \u20b915,00,000 divided into 1,50,000 equity shares of \u20b9 10 each on which \u20b9 6 is paid up. During the year, company decided to reorganize its capital by consolidating 5 shares into one share of \u20b9 50 each, \u20b9 30 paid up. (May 2018) (6 Marks)
    \nAnswer:
    \n\"Internal<\/p>\n

    \"Internal<\/p>\n

    Question 3.
    \nFollowing is the summarized Balance Sheet of M Ltd. as at March 31, 2013.
    \n\"Internal
    \nOn 1.4.2013, M Ltd. adopted the following scheme of reconstruction:<\/p>\n

      \n
    1. Each equity share shall be sub-divided into 10 equity shares of \u20b9 10 each fully paid up. 50% of the equity share capital would be surrendered to the Company.<\/li>\n
    2. Preference dividends are in arrear for 3 years. Preference shareholders agreed to waive 90% of the dividend claim and accept payment for the balance.<\/li>\n
    3. Own debentures of \u20b9 80,000 were sold at \u20b9 98 cum-interest and remaining own debentures were cancelled.<\/li>\n
    4. Debenture holders of \u20b9 2,80,000 agreed to accept one machinery of book value of \u20b9 3,00,000 in full settlement.<\/li>\n
    5. Trade payables, trade receivables and inventory were valued at \u20b9 3,50,000, \u20b9 5,90,000 and \u20b9 3,60,000 respectively. The goodwill, discount on issue of debentures and Profit and Loss (Dr.) are to be written off.<\/li>\n
    6. The Company paid \u20b9 15,000 as penalty to avoid capital commitments of \u20b9 3,00,000. You are required to give Journal entries for reconstruction in the books of M Ltd.<\/li>\n<\/ol>\n

      Answer:
      \nJournal Entries
      \nIn the Books of M Ltd.
      \n\"Internal
      \n\"Internal<\/p>\n

      \"Internal<\/p>\n

      Question 4.
      \nThe ledger balance of C Ltd. as on 31st March, 2014 are:<\/p>\n

      Profit & loss account (Dr.) balance 10,20,000, Fixed Assets \u20b9 7,00,000, Investment \u20b9 10,000, Inventory \u20b9 3,90,000 Trade receivables \u20b9 4,60,000. Equity Share Capital (60% paid) \u20b9 6,00,000,10% First Debentures \u20b9 2,00,000,12% Second Debentures \u20b9 5,00,000, Bank overdraft \u20b9 50,000, Trade payables (including Y for \u20b9 8,50,000) \u20b9 11,50,000, Outstanding interest for one year on both type of debentures.<\/p>\n

      Due to heavy losses, the following scheme of re-construction is agreed:
      \n(a) To make the existing \u20b9 100 equity shares fully paid up and then to reduce them to \u20b9 20 each.
      \n(b) To settle the claims of first Debenture holders by issuing 2,000, 13.5% Debentures of \u20b9 100 each.
      \n(c) To discharge the claims of the second debenture holders by issuing 15% 4,000 debentures of \u20b9 100 each.
      \n(d) To pay \u20b9 3,00,000 to Mr. Y in full settlement of his account.
      \n(e) To allot 15,000 fresh equity shares of \u20b9 20 each to discharge the remaining trade payables.
      \n(f) Market value of investments is \u20b9 20,000, and
      \n(g) To reduce the value of fixed assets.
      \nAssuming all formalities are duly complied with, pass journal entries to give effect to the above scheme and prepare the post-reconstruction Balance Sheet.
      \nAnswer:
      \nJournal Entries in the books of C Ltd.
      \n\"Internal
      \n\"Internal<\/p>\n

      Balance Sheet of C Ltd. as at 31 March, 2014 (And Reduced)
      \n\"Internal<\/p>\n

      Notes to Accounts
      \n\"Internal<\/p>\n

      \"Internal<\/p>\n

      Question 5.
      \nThe Balance Sheet of Vaibhav Ltd. as on 31 st March 2014 is as follows:
      \n\"Internal<\/p>\n

      The following scheme of Internal Reconstruction is sanctioned:<\/p>\n

        \n
      1. All the existing equity shares are reduced to \u20b9 40 each.<\/li>\n
      2. All preference shares are reduced for \u20b9 60 each.<\/li>\n
      3. The rate of Interest on Debentures increased to 6%. The Debenture holders surrender their existing debentures of \u20b9 100 each and exchange the same for fresh debentures of \u20b9 70 each for every debenture held by them.<\/li>\n
      4. Fixed assets are to be written down by 20%.<\/li>\n
      5. Current assets are to be revalued at \u20b9 90,00,000.<\/li>\n
      6. Investments are to be brought to their market value.<\/li>\n
      7. One of the creditors of the company to whom the company owes \u20b9 40,00,000 decides to forgo 40% of his claim. The creditor is allotted with 60000 equity shares of 140 each in full and final settlement of his claim.<\/li>\n
      8. The taxation liability is to be settled at \u20b9 3,00,000.<\/li>\n
      9. It is decided to write off the debit balance of Profit & Loss A\/c.<\/li>\n<\/ol>\n

        Pass journal entries and show the Balance Sheet of the company after giving effect to the above. (Nov. 2014) (16 Marks)
        \nAnswer:
        \nJournal Entries in the books of Vaibhav Ltd.
        \n\"Internal
        \n\"Internal<\/p>\n

        Balance Sheet of Vaibhav Ltd. (After Reconstruction) as on 31.3.2014
        \n\"Internal<\/p>\n

        Notes to accounts
        \n\"Internal<\/p>\n

        Working Note:
        \nCapital Reduction Account
        \n\"Internal<\/p>\n

        \"Internal<\/p>\n

        Question 6.
        \nThe Balance Sheet of A & Co. Ltd. as on 31-12-20X1 is as follows:
        \n\"Internal<\/p>\n

        The Court approved a Scheme of re-organisation to take effect on 1-1-20X1, whereby:<\/p>\n

          \n
        1. The Preference shares to be written down to \u20b9 75 each and Equity Shares to \u20b9 2 each.<\/li>\n
        2. Of the Preference Share dividends which are in arrears for four years, three fourths to be waived and Equity Shares of \u20b9 2 each to be allotted for the remaining quarter.<\/li>\n
        3. Accrued interest on debentures to be paid in cash.<\/li>\n
        4. Debenture-holders agreed to takeover freehold property, book value \u20b9 1,00,000 at a valuation of \u20b9 1,20,000 in part repayment of their holdings and to provide additional cash of \u20b9 1,30,000 secured by a floating charge on company\u2019s assets at an interest rate of 8% p.a.<\/li>\n
        5. Patents and Goodwill to be written off.<\/li>\n
        6. Inventory to be written off by \u20b9 65,000.<\/li>\n
        7. Amount of \u20b9 68,500 to be provided for bad debts.<\/li>\n
        8. Remaining freehold property to be re-valued at \u20b9 3,87,500.<\/li>\n
        9. Trade Investments be sold for \u20b9 1,40,000.<\/li>\n
        10. Directors to accept settlement of their loans as to 90% thereof by allotment of equity shares of \u20b9 2 each and as to 5% in cash, and balance 5% being waived.<\/li>\n
        11. There were capital commitments totalling \u20b9 2,50,000. These contracts are to be cancelled on payment of 5% of the contract price as a penalty.<\/li>\n
        12. Ignore taxation and cost of the scheme.<\/li>\n<\/ol>\n

          You are requested to show Journal entries reflecting the above transactions {including cash transactions) and prepare the Balance Sheet of the company after completion of the Scheme.
          \nAnswer:
          \nJournal of A & Co. Ltd.
          \n\"Internal
          \n\"Internal
          \n\"Internal<\/p>\n

          Balance Sheet of A & Co. Ltd. (And Reduced) as on 1st January, 20X2
          \n\"Internal<\/p>\n

          Notes to accounts
          \n\"Internal<\/p>\n

          \"Internal<\/p>\n

          Question 7.
          \nV Limited decided to reconstruct its business as it has accumulated huge losses. The following is the summarized Balance Sheet of the company as on 31.03.2014 before reconstruction:
          \nSummarized Balance Sheet as on 31.03.2014
          \n\"Internal
          \nFollowing scheme of reconstruction is approved by all interested parties and the Court:<\/p>\n

            \n
          1. All equity shares are reduced to \u20b9 3 each and preference shares to \u20b9 7 each.<\/li>\n
          2. Debenture holders agreed to takeover a part of land and building, book value of which is \u20b9 14,00,000, towards their 50% claim. Rate of interest of balance 50% debentures will be increased to 9%.<\/li>\n
          3. Goodwill and Patent will be written off.<\/li>\n
          4. 10% of Trade receivables to be provided for bad debts.<\/li>\n
          5. Inventory to be written off by \u20b9 5,20,000.<\/li>\n
          6. 50% of balance of Land & Building sold for \u20b9 12,00,000 and remaining Land & Building valued at \u20b9 12,00,000.<\/li>\n
          7. Investments to be sold for \u20b9 4,00,000.<\/li>\n
          8. There are pending contracts amounting to \u20b9 20,00,000. These contracts are to be cancelled on payment of penalty @ 5% of pending contract amount.<\/li>\n
          9. The income tax liability of the company is settled at \u20b9 6,12,000. Provision for income tax will be raised accordingly.<\/li>\n
          10. 1\/3 of trade payables decided to forgo their claim.<\/li>\n
          11. After making all the above adjustments, balance amount available through scheme, will be utilized to write off the value of plant & machinery to that extent.<\/li>\n<\/ol>\n

            You are required to pass the necessary Journal Entries.
            \nAnswer:
            \nJournal Entries (in the books of V Limited)
            \n\"Internal
            \n\"Internal
            \n\"Internal<\/p>\n

            \"Internal<\/p>\n

            Question 8.
            \nK Limited decided to reconstruct its business as it has accumulated huge losses. The following is the Balance Sheet of the company as on 31.03.2016 before reconstruction:
            \nBalance Sheet as on 31.03.2018
            \n\"Internal<\/p>\n

            Following scheme of reconstruction is approved by all interested parties and the Court:<\/p>\n

              \n
            1. All equity shares are reduced to \u20b9 3 each and preference shares to \u20b9 7 each.<\/li>\n
            2. Debenture holders agreed to takeover a part of land and building, book value of which is \u20b9 14,00,000, towards their 50% claim. Rate of interest of balance 50% debentures will be increased to 9%.<\/li>\n
            3. Patent will be written off.<\/li>\n
            4. 10% of Trade receivables to be provided for bad debts.<\/li>\n
            5. Inventory to be written off by \u20b9 5,20,000.<\/li>\n
            6. 50% of balance Land & Building sold for \u20b9 12,00,000 and remaining Land & Building valued at \u20b9 12,00,000.<\/li>\n
            7. Investments to be sold for \u20b9 4,00,000.<\/li>\n
            8. The income tax liability of the company is settled at \u20b9 4,50,000. Provision for income tax will be raised accordingly.<\/li>\n
            9. 1\/3 of trade payables decided to forgo their claim.<\/li>\n
            10. After making all the above adjustments, balance amount available through scheme, will be utilized to write off the value of plant & machinery to that extent.<\/li>\n<\/ol>\n

              You are required to pass the necessary Journal Entries.
              \nAnswer:
              \nJournal Entries (In the books of K Limited)
              \n\"Internal
              \n\"Internal<\/p>\n

              \"Internal<\/p>\n

              Question 9.
              \nProficient Infosoft Ltd. is in the hand of a Receiver for Debenture Holders who holds a charge on all asset except uncalled capital. The following statement shows the position as regards creditors as on 30th June, 2016:
              \n\"Internal
              \nA holds the first debentures for \u20b9 3,60,000 and second debentures for \u20b9 3,60,000. He is also an unsecured trade payable for \u20b9 1,08,000. B holds second debentures for \u20b9 3,60,000 and is an unsecured trade payable for \u20b9 72,000.<\/p>\n

              The following scheme of reconstruction is proposed.<\/p>\n

                \n
              1. A is to cancel \u20b9 2,52,000 of the total debt owing to him; to bring \u20b9 36,000 in cash and to take first debentures (in cancellation of those already issued to him) for \u20b9 6,12,000 In satisfaction of all his claims.<\/li>\n
              2. B to accept \u20b9 1,08,000 in cash in satisfaction of all claims by him.<\/li>\n
              3. In full settlement of 60% of the claim, unsecured trade payable (other than A and B) agreed to accept three shares of \u20b9 25 each, fully paid against their claim for each \u20b9 100. The balance of 40% is to be postponed and to be payable at the end of three years from the date of Court\u2019s approval of the scheme. The nominal share capital is to be increased accordingly.<\/li>\n
              4. Uncalled capital is to be called up in full and \u20b9 75 per share cancelled, thus making the shares of \u20b9 25 each.<\/li>\n<\/ol>\n

                Assuming that the scheme is duly approved by all parties interested and by the Court, give necessary journal entries. (Nov. 2016) (16 Marks)
                \nAnswer:
                \nJournal Entries :
                \n\"Internal
                \n\"Internal<\/p>\n

                Working Notes:
                \n\"Internal<\/p>\n

                \"Internal<\/p>\n

                Question 10.
                \nThe summarized Balance Sheet of V Ltd. as on 31st March 2014 is as follows:
                \n\"Internal<\/p>\n

                The following scheme of Internal Reconstruction is sanctioned:<\/p>\n

                  \n
                1. All the existing equity shares are reduced to \u20b9 40 each.<\/li>\n
                2. All preference shares are reduced to \u20b9 60 each.<\/li>\n
                3. The rate of Interest on Debentures increased to 6%. The Debenture holders surrender their existing debentures of \u20b9 100 each and exchange the same for fresh debentures of \u20b9 70 each for every debenture held by them.<\/li>\n
                4. Fixed assets are to be written down by 20%.<\/li>\n
                5. Current assets are to be revalued at \u20b9 90,00,000.<\/li>\n
                6. Investments are to be brought to their market value.<\/li>\n
                7. One of the creditors of the company (included under trade payables in the above balance sheet) to whom the company owes \u20b9 40,00,000 decides to forgo 40% of his claim. The creditor is allotted with 60000 equity shares of t 40 each in full and final settlement of his claim.<\/li>\n
                8. The taxation liability is to be settled at \u20b9 3,00,000.<\/li>\n
                9. It is decided to write off the debit balance of Profit & Loss A\/c.<\/li>\n<\/ol>\n

                  Pass necessary journal entries and show the Balance Sheet of the company after giving effect to the above.
                  \nAnswer:
                  \nJournal Entries (In the hooks of V Ltd.)
                  \n\"Internal
                  \n\"Internal
                  \n\"Internal<\/p>\n

                  Balance Sheet of VLtd. (After Reconstruction) as on 31.3.2014
                  \n\"Internal<\/p>\n

                  Notes to accounts
                  \n\"Internal
                  \n\"Internal<\/p>\n

                  \"Internal<\/p>\n

                  Question 11.
                  \nFollowing is the Balance Sheet of XYZ Ltd. as on 31st March, 2010:
                  \n\"Internal<\/p>\n

                  Due to heavy losses and overvatuation of assets, the following scheme of reconstruction was finalised:<\/p>\n

                    \n
                  1. Preference shareholders will surrender their 20% shares and they have been allotted 9% (new) preference shares for the remaining amount.<\/li>\n
                  2. Debenture holders having charge on plant and machinery would accept plant and machinery in full settlement.<\/li>\n
                  3. Trade creditors accepted to takeover the stock upto the value of \u20b9 6,20,000.<\/li>\n
                  4. Equity shareholders are to accept reduction of \u20b9 4 per share.<\/li>\n
                  5. Investment is to be valued at market price i.e., \u20b9 60,000.<\/li>\n
                  6. Sundry debtors and remaining stock is to be valued at 90% of their book value.<\/li>\n
                  7. Directors have to forgo their loan in full.<\/li>\n
                  8. Patents and Copyright and Goodwill have no more value.<\/li>\n<\/ol>\n

                    Pass necessary journal entries in the books of XYZ Ltd. assuming that all the legal formalities have been completed. Prepare capital reduction account and Balance Sheet of the company after reduction. (May 2010) (16 Marks)
                    \nAnswer:
                    \nIn the books of XYZ Ltd.
                    \nJournal Entries
                    \n\"Internal
                    \n\"Internal<\/p>\n

                    Capital Reduction Account
                    \n\"Internal<\/p>\n

                    Balance Sheet (and reduced) of M\/s XYZ Ltd.
                    \n\"Internal<\/p>\n

                    \"Internal<\/p>\n

                    Question 12.
                    \nThe Balance Sheet of X Limited as on 31st March 2011, was as follows:
                    \n\"Internal
                    \nIt was decided to reconstruct the company for which necessary resolution was passed and sanctions were obtained from the appropriate authorities. Accordingly, it was decided that:<\/p>\n

                      \n
                    1. Each share be sub-divided into 10 fully paid up equity share of \u20b9 10 each.<\/li>\n
                    2. After sub-division, each shareholder shall surrender to the company 50% of his holding for the purpose of reissue to debenture holders and creditors as necessary.<\/li>\n
                    3. Out of shares surrendered 10,000 shares of \u20b9 10 each shall be converted into 10% Preference shares of \u20b9 10 each fully paid up.<\/li>\n
                    4. The claims of the debenture holders shall be reduced by 50%. In consideration of the reduction, the debenture holder shall receive Preference Shares of \u20b9 1,00,000 which are converted out of shares surrendered,<\/li>\n
                    5. Creditors claim shall be reduced by 25%. Remaining creditors are to be settled by the issue of equity shares of \u20b9 10 each of out of shares surrendered.<\/li>\n
                    6. Balance of Profit and Loss account to be written off.<\/li>\n
                    7. The shares surrendered and not re-issued shall be cancelled.<\/li>\n<\/ol>\n

                      Pass Journal Entries giving effect to the above and the resultant Balance Sheet. (May 2011) (16 Marks)
                      \nAnswer:
                      \nIn the books of X Limited Journal Entries
                      \n\"Internal<\/p>\n

                      X Limited (and reduced) Balance Sheet as on ………
                      \n\"Internal<\/p>\n

                      \"Internal<\/p>\n

                      Question 13.
                      \nThe Balance Sheet of L Limited as on 31-03-2016 is given below:
                      \n\"Internal<\/p>\n

                      Notes to Accounts:
                      \n\"Internal
                      \nThe Board of Directors of the company decided upon the following scheme of reconstruction with the consent of respective shareholders:<\/p>\n

                        \n
                      1. Preference Shares are to be written down to 180 each and Equity Shares to \u20b9 2 each.<\/li>\n
                      2. Preference Shares Dividend in arrears for 3 years to be waived by 2\/3rd and for balance 1\/3rd, Equity Shares of \u20b9 2 each to be allotted.<\/li>\n
                      3. Debenture holders agreed to take one Freehold Property at its book value of \u20b9 300 lakh in part payment of their holding. Balance Debentures to remain as liability of the company.<\/li>\n
                      4. Interest accrued and due on Debentures to be paid in cash.<\/li>\n
                      5. Remaining Freehold Property to be valued at \u20b9 400 lakh.<\/li>\n
                      6. All investments sold out for \u20b9 250 lakh.<\/li>\n
                      7. 70% of Directors\u2019 loan to be waived and for the balance, Equity Shares of \u20b9 2 each to be allowed.<\/li>\n
                      8. 40% of Trade receivables and 80% of Inventories to be written off.<\/li>\n
                      9. Company\u2019s contractual commitments amounting to \u20b9 600 lakh have been settled by paying 5% penalty of contract value.<\/li>\n<\/ol>\n

                        You are required to:
                        \n(a) Pass Journal Entries for all the transactions related to internal reconstruction;
                        \n(b) Prepare Capital Reduction Account; and
                        \n(c) Prepare notes on Share Capital and Tangible Assets to Balance Sheet, immediately after the implementation of scheme of internal reconstruction.
                        \nAnswer:
                        \n(a) Journal Entries in the books of L Ltd.
                        \n\"Internal
                        \n\"Internal<\/p>\n

                        Capital Reduction Account
                        \n\"Internal<\/p>\n

                        Notes to Balance Sheet
                        \n\"Internal<\/p>\n

                        \"Internal<\/p>\n

                        Question 14.
                        \nThe shareholders of L Ltd. decided on a corporate restructuring exercise necessitated because of economic recession. From the given summarised balance sheet as on 31-3-2017 and the information supplied, you are required to prepare<\/p>\n

                          \n
                        1. Journal entries reflecting the scheme of reconstruction,<\/li>\n
                        2. Capital reduction account,<\/li>\n
                        3. Cash account in the books of L Ltd.<\/li>\n<\/ol>\n

                          Summarised Balance Sheet of L Ltd. as on 31.3.2017
                          \n\"Internal
                          \nNote: Preference dividends are in arrears for 4 years.<\/p>\n

                          The scheme of reconstruction that received the permission of the Court was on the following lines:<\/p>\n

                            \n
                          1. The authorized capital of the Company to be re-fixed at \u20b9 10 lakhs (preference capital of \u20b9 3 lakhs and equity capital of \u20b9 7 lakhs). Both classes of shares are of \u20b9 10 each.<\/li>\n
                          2. The preference shares are to be reduced to \u20b9 5 each and equity shares reduced by \u20b9 3 per share. Post reduction, both classes of shares to be re-consolidated into \u20b9 10 shares.<\/li>\n
                          3. Trade Investments are to be liquidated in open market.<\/li>\n
                          4. One fresh equity shares of \u20b9 10 to be issued for every \u20b9 40 of preference dividends in arrears (ignore taxation).<\/li>\n
                          5. Expenses for the scheme were \u20b9 10,000.<\/li>\n
                          6. The debenture holders took over freehold land at \u20b9 2,10,000 and settled the balance after adjusting their dues.<\/li>\n
                          7. Unprovided contingent liabilities were settled at \u20b9 54,000 and a pending insurance claim receivable settled at \u20b9 12,500.<\/li>\n
                          8. The intangible assets were all to be written off along with \u20b9 10,000 worth obsolete packing material and 10% of the receivables.<\/li>\n
                          9. Remaining cash available as a result of the above transactions is to be utilized to payoff the bank overdraft to that extent.<\/li>\n
                          10. The Equity shareholders agree that they will bring in necessary cash to liquidate the balance outstanding on the overdraft account by subscribing the fresh shares. The equity shares will be issued at par for this purpose.<\/li>\n<\/ol>\n

                            Answer:
                            \n(i) In the books of L Ltd.
                            \nJournal Entries
                            \n\"Internal
                            \n\"Internal
                            \n\"Internal
                            \n\"Internal<\/p>\n

                            (ii) Capital Reduction Account
                            \n\"Internal<\/p>\n

                            (iii) Cash Account
                            \n\"Internal
                            \nNote: Shares issued to existing equity shareholders for bringing cash for payment of balance of bank overdraft = \u20b9 2,23,100 – \u20b9 97,100 = \u20b9 1,26,000<\/p>\n

                            \"Internal<\/p>\n

                            Question 15.
                            \nThe summarized Balance Sheet of SK Ltd. as on 31st March, 2018 is given below.
                            \n\"Internal<\/p>\n

                            The following Scheme of Internal Reconstruction is approved and put into effect on 31st March, 2018.<\/p>\n

                              \n
                            1. Investments are to be brought to their market value.<\/li>\n
                            2. The Taxation Liability is settled at \u20b9 5,25,000 out of current Assets.<\/li>\n
                            3. The balance of Profit and Loss Account to be written off.<\/li>\n
                            4. All the existing equity shares are reduced to \u20b9 4 each.<\/li>\n
                            5. All preference shares are reduced to \u20b9 60 each.<\/li>\n
                            6. The rate of interest on debentures is increased to 9%. The Debenture holders surrender their existing debentures of 1100 each and exchange them for fresh debentures of \u20b9 80 each. Each old debenture is exchanged for one new debenture.<\/li>\n
                            7. Balance of Current Assets left after settlement of taxation liability are revalued at \u20b9 1,57,50,000.<\/li>\n
                            8. Fixed Assets are written down to 80%.<\/li>\n
                            9. One of the creditors of the Company for \u20b9 70,00,000 gives up 50% of his claim. He is allotted 8,75,000 equity shares of \u20b9 4 each in full and final settlement of his claim.<\/li>\n<\/ol>\n

                              Pass journal entries for the above transactions. (November 2018 – New Course) (10 Marks)
                              \nAnswer:
                              \nJournal Entries in the books of SK Ltd.
                              \n\"Internal
                              \n\"Internal<\/p>\n

                              \"Internal<\/p>\n

                              Working Note:
                              \nCapital Reduction Account
                              \n\"Internal<\/p>\n

                              Comprehensive Questions<\/strong><\/p>\n

                              Question 16.
                              \nThe Balance Sheet of M\/s. Ice Ltd. as on 31-03-2011 is given below:
                              \n\"Internal<\/p>\n

                              The Board of Directors of the company decided upon the following scheme of reconstruction with the consent of respective stakeholders:<\/p>\n

                                \n
                              1. Preference shares are to be written down to \u20b9 80 each and equity shares to \u20b9 2 each.<\/li>\n
                              2. Preference dividend in arrear for 3 years to be waived by 2\/3rd and for balance 1 \/3rd, equity shares of \u20b9 2 each to be allotted.<\/li>\n
                              3. Debenture holders agreed to take one freehold property at its book value of \u20b9 3,00,000 in part payment of their holding. Balance debentures to remain as liability of the company.<\/li>\n
                              4. Arrear debenture interest to be paid in cash.<\/li>\n
                              5. Remaining freehold property to be valued at \u20b9 4,00,000.<\/li>\n
                              6. Investment sold out for \u20b9 2,50,000.<\/li>\n
                              7. 75% of Director\u2019s loan to be waived and for the balance, equity shares of \u20b9 2 each to be allotted.<\/li>\n
                              8. 40% of sundry debtors, 80% of stock and 100% of deferred advertisement expenses to be written off.<\/li>\n
                              9. Company\u2019s contractual commitments amounting to \u20b9 6,00,000 have been settled by paying 5% penalty of contract value.<\/li>\n<\/ol>\n

                                Show the Journal Entries for giving effect to the internal re construction and draw the Balance Sheet of the company after effecting the scheme. (Nov. 2011) (18 Marks)
                                \nAnswer:
                                \nJournal Entries (In the books of Ice Ltd.)
                                \n\"Internal
                                \n\"Internal<\/p>\n

                                Balance Sheet of Ice Ltd. (As reduced)
                                \n\"Internal<\/p>\n

                                \"Internal<\/p>\n

                                Question 17.
                                \nM\/s. Platinum Limited has decided to reconstruct the Balance Sheet since it has accumulated huge losses. The following is the Balance Sheet of the company as on 31st March, 2012 before reconstruction:
                                \n\"Internal<\/p>\n

                                Following is the interest of Mr. Shiv and Mr. Ganesh in M\/s Platinum Limited:
                                \n\"Internal<\/p>\n

                                The following scheme of internal reconstruction was framed and implemented, as approved by the court and concerned parties:
                                \n(1) Uncalled capital is to be called up in full and then all the shares to be converted into Equity Shares of \u20b9 40 each.<\/p>\n

                                (2) The existing shareholders agree to subscribe in cash, fully paid up equity shares of \u20b9 40 each for \u20b9 12,50,000.<\/p>\n

                                (3) Trade Creditors are given option of either to accept fully paid equity shares of \u20b9 40 each for the amount due to them or to accept 70% of the amount due to them in cash in full settlement of their claim. Trade Creditors for \u20b9 7,50,000 accept equity shares and rest of them opted for cash towards full and final settlement of their claim.<\/p>\n

                                (4) Mr. Shiv agrees to cancel debenture amounting to \u20b9 2,00,000 out of total debentures due to him and agree to accept 15% Debentures for the balance amount due. He also agree to subscribe further 15% Debentures in cash amounting to \u20b9 100,000.<\/p>\n

                                (5) Mr. Ganesh agrees to cancel debenture amounting to \u20b9 50,000 out of total debentures due to him and agree to accept 15% Debentures for the balance amount due.<\/p>\n

                                (6) Land & Building to be revalued at \u20b9 51,84,000, Machinery at \u20b9 7,20,000, Computers at \u20b9 4,00,000, Stock at \u20b9 3,50,000 and Trade Debtors at 10% less to as they are appearing in Balance Sheet as above.<\/p>\n

                                (7) Outstanding Expenses are fully paid in cash.<\/p>\n

                                (8) Goodwill and Profit & Loss A\/c will be written off and balance, if any, of Capital Reduction A\/c will be adjusted against Capital Reserve.<\/p>\n

                                You are required to pass necessary Journal Entries for all the above transactions and draft the company\u2019s Balance Sheet immediately after the reconstruction. (May 2012) (16 Marks)
                                \nAnswer:
                                \nJournal Entries
                                \n\"Internal
                                \n\"Internal<\/p>\n

                                Balance Sheet (as reduced) as on 31.3.2012
                                \n\"Internal<\/p>\n

                                Working Notes:
                                \n1. Cash at Bank Account
                                \n\"Internal<\/p>\n

                                2. Capital Reduction Account
                                \n\"Internal<\/p>\n

                                \"Internal<\/p>\n

                                Question 18.
                                \nThe Balance Sheet of M\/s. Cube Limited as on 31-03-2013 is given below:
                                \n\"Internal<\/p>\n

                                Notes to Accounts:
                                \n\"Internal
                                \nThe Board of Directors of the company decided upon the following scheme of reconstruction with the consent of respective shareholders:<\/p>\n

                                  \n
                                1. Preference Shares are to be written down to \u20b9 80 each and Equity Shares to \u20b9 2 each.<\/li>\n
                                2. Preference Shares Dividend in arrears for 3 years to be waived by 2\/3rd and for balance 1\/3 rd, Equity Shares of \u20b9 2 each to be allotted.<\/li>\n
                                3. Debenture holders agreed to take one Freehold Property at its book value of \u20b9 150 lakh in part payment of their holding. Balance Debentures to remain as liability of the company.<\/li>\n
                                4. Interest accrued and due on Debentures to be paid in cash.<\/li>\n
                                5. Remaining Freehold Property to be valued at \u20b9 200 lakh.<\/li>\n
                                6. All investments sold out for \u20b9 125 lakh.<\/li>\n
                                7. 70% of Directors\u2019 loan to be waived and for the balance, Equity Shares of \u20b9 2 each to be allowed.<\/li>\n
                                8. 40% of Sundry Debtors and 80% of Inventories to be written off.<\/li>\n
                                9. Company\u2019s contractual commitments amounting to \u20b9 300 lakh have been settled by paying 5% penalty of contract value.<\/li>\n<\/ol>\n

                                  You are required to:
                                  \n(a) Pass Journal Entries for all the transactions related to internal reconstruction;
                                  \n(b) Prepare Reconstruction Account; and
                                  \n(c) Prepare notes on Share Capital and Tangible Assets to Balance Sheet, immediately after the implementation of scheme of internal reconstruction. (May 2013) (16 Marks)
                                  \nAnswer:
                                  \n(a) Journal Entries in the books of M\/s. Cube Ltd.
                                  \n\"Internal
                                  \n\"Internal
                                  \n\"Internal<\/p>\n

                                  (b) Reconstruction Account
                                  \n\"Internal<\/p>\n

                                  (c) Notes to Balance Sheet
                                  \n\"Internal<\/p>\n

                                  \"Internal<\/p>\n

                                  Question 19.
                                  \nM\/s. Planet Limited has decided to reconstruct the Balance Sheet since it has accumulated huge tosses. The following is the balance sheet of the company as on 31st March, 2017 before reconstruction:
                                  \n\"Internal<\/p>\n

                                  Notes to Accounts:
                                  \n\"Internal
                                  \nThe Board of Directors of the company decided upon the following scheme of reconstruction with the consent of respective shareholders:<\/p>\n

                                    \n
                                  1. Preference Shares are to be written down to \u20b9 75 each and Equity Shares to \u20b9 2 each.<\/li>\n
                                  2. Preference Shares Dividend in arrears for 3 years to be waived by 2\/3rd and for balance 1\/3rd, Equity Shares of \u20b9 2 each to be allotted.<\/li>\n
                                  3. Debenture holders agreed to take one Freehold Property at its book value of \u20b9 450 lakh in part payment of their holding. Balance Debentures to remain as liability of the company.<\/li>\n
                                  4. Interest accrued and due on Debentures to be paid in cash.<\/li>\n
                                  5. Remaining Freehold Property to be valued at \u20b9 550 lakh.<\/li>\n
                                  6. All investments sold out for \u20b9 425 lakh.<\/li>\n
                                  7. 70% of Directors\u2019 loan to be waived and for the balance, Equity Shares of \u20b9 2 each to be allotted.<\/li>\n
                                  8. 40% of Trade receivables and 80% of Inventories to be written off.<\/li>\n
                                  9. Company\u2019s contractual commitments amounting to \u20b9 900 lakh have been settled by paying 8% penalty of contract value.<\/li>\n<\/ol>\n

                                    You are required to:
                                    \n(a) Pass Journal Entries for all the transactions related to internal reconstruction;
                                    \n(b) Prepare Capital Reduction Account, Bank Account; and
                                    \n(c) Prepare Notes to Accounts on Share Capital and Tangible Assets, immediately after the implementation of internal reconstruction. (Nov 2017) (16 Marks)
                                    \nAnswer:
                                    \n(a) Journal Entries related to internal reconstruction (in the books of Planet Ltd.)
                                    \n\"Internal
                                    \n\"Internal<\/p>\n

                                    (b) Capital Reduction Account
                                    \n\"Internal<\/p>\n

                                    (c) Note to Accounts on Share Capital and Tangible Assets after implementation of internal reconstruction
                                    \n\"Internal<\/p>\n

                                    Working Note:
                                    \nCalculation of number of equity shares issued:
                                    \n\"Internal<\/p>\n

                                    \"Internal<\/p>\n

                                    Question 20.
                                    \nThe Abridged Balance Sheet (Draft) of C Ltd. as on 31st March, 2012 is as under:
                                    \n\"Internal
                                    \nThe following scheme is passed and sanctioned by the court:
                                    \n(i) A new company M Ltd. is formed with \u20b9 3,00,000, divided into 30,000 Equity shares of \u20b9 10 each.<\/p>\n

                                    (ii) The new company will acquire the assets and liabilities of C Ltd. on the following terms:
                                    \n(a) Old company\u2019s debentures are paid by similar debentures in new company and for outstanding accrued interest, shares of equal amount are issued at par.
                                    \n(b) The trade payables are paid for every \u20b9 100, \u20b9 16 in cash and 10 shares issued at par.
                                    \n(c) Preference shareholders are to get equal number of equity shares at par. For arrears of dividend amounting to \u20b9 12,000, 5 shares are issued at par for each \u20b9 100 in full satisfaction.
                                    \n(d) Equity shareholders are issued one share at par for every three shares held.
                                    \n(e) Expenses of \u20b9 8,000 are to be borne by the new company.<\/p>\n

                                    (iii) Current Assets are to be taken at book value (except stock, which is to be reduced by \u20b9 3,000). Goodwill is to be eliminated, balance of purchase consideration being attributed to fixed assets.<\/p>\n

                                    (iv) Remaining shares of the new company are issued to public at par and are fully paid.<\/p>\n

                                    You are required to show:
                                    \n(a) In the old company\u2019s books:
                                    \n(i) Realisation Account
                                    \n(ii) Equity Shareholder\u2019s Account
                                    \n(b) In the new company\u2019s books:
                                    \n(i) Bank Account
                                    \n(ii) Summarised Balance Sheet as per the requirements of Schedule III.
                                    \nAnswer:
                                    \n(a) (i) In the books of C Ltd i.e. Old company\u2019s books
                                    \nRealisation Account
                                    \n\"Internal<\/p>\n

                                    (b) (i) In the books of M Ltd (New company)
                                    \nBank Account
                                    \n\"Internal<\/p>\n

                                    (ii) Balance Sheet as on 31st March, 2012
                                    \n\"Internal<\/p>\n

                                    Notes to Accounts
                                    \n\"Internal<\/p>\n

                                    2. Calculation of fair value at which fixed assets have been acquired by M Ltd.<\/p>\n

                                    Since, the question states that \u2018balance of purchase consideration is being attributed to fixed assets\u2019, it is implied that the amount of purchase consideration is equal to the fair value at which the net assets have been acquired.<\/p>\n

                                    Therefore, the difference of fair value of net assets (excluding fixed assets) and the purchase consideration is the fair value at which the fixed assets have been acquired.
                                    \n\"Internal<\/p>\n

                                    4. Calculation of number of Equity shares issued to public
                                    \n\"Internal<\/p>\n

                                    \"Internal<\/p>\n

                                    Question 21.
                                    \nP Limited has decided to reconstruct the Balance Sheet since it has accumulated huge losses. The following is the draft Balance Sheet of the company as on 31st March, 2014 before reconstruction:
                                    \n\"Internal
                                    \nThe following scheme of internal reconstruction was framed and implemented, as approved by the court and concerned parties:
                                    \n(1) Uncalled capital is to be called up in full and then all the shares to be converted into Equity Shares of \u20b9 40 each.<\/p>\n

                                    (2) The existing shareholders agree to subscribe in cash, fully paid up equity shares of 40 each for \u20b9 12,50,000.<\/p>\n

                                    (3) Trade payables are given option of either to accept fully paid equity shares of \u20b9 40 each for the amount due to them or to accept 70% of the amount due to them in cash in full settlement of their claim. Trade payables for \u20b9 7,50,000 accept equity shares and rest of them opted for cash towards full and final settlement of their claim.<\/p>\n

                                    (4) Mr. S agrees to cancel debentures amounting to \u20b9 2,00,000 out of total debentures due to him and agree to accept 15% Debentures for the balance amount due. He also agree to subscribe further 15% Debentures in cash amounting to \u20b9 1,00,000.<\/p>\n

                                    (5) Mr. G agrees to cancel debentures amounting to \u20b9 50,000 out of total debentures due to him and agree to accept 15% Debentures for the balance amount due.<\/p>\n

                                    (6) Land & Building to be revalued at \u20b9 51,84,000, Machinery at \u20b9 7,20,000, Computers at \u20b9 4,00,000, Inventories at \u20b9 3,50,000 and Trade receivables at 10% less to as they are appearing in Balance Sheet as above.<\/p>\n

                                    (7) Outstanding Expenses are fully paid in cash.<\/p>\n

                                    (8) Goodwill and Profit & Loss A\/c will be written off and balance, if any, of Capital Reduction A\/c will be adjusted against Capital Reserve.<\/p>\n

                                    You are required to pass necessary Journal Entries for all the above transactions and draft the company\u2019s Balance Sheet immediately after the reconstruction.
                                    \nAnswer:
                                    \nJournal Entries in the books of P Ltd.
                                    \n\"Internal
                                    \n\"Internal<\/p>\n

                                    Balance Sheet (as reduced) as on 31.3.2014
                                    \n\"Internal
                                    \n\"Internal<\/p>\n

                                    Notes to accounts
                                    \n\"Internal<\/p>\n

                                    Capital Reduction Account
                                    \n\"Internal<\/p>\n

                                    \"Internal<\/p>\n

                                    Question 22.
                                    \nFollowing is the summarized Balance Sheet of R Limited as on 31st March, 2017.
                                    \nBalance Sheet as on 31st March 2017
                                    \n\"Internal
                                    \nNote: The arrears of preference dividend amount to \u20b9 2,80,000.<\/p>\n

                                    The company had suffered losses since last 3 years due to bad market conditions and hope for a better position in the future.<\/p>\n

                                    The following scheme of reconstruction has been agreed upon and duly approved by all concerned:<\/p>\n

                                      \n
                                    1. Equity shares to be converted into 3,00,000 shares of \u20b9 10 each.<\/li>\n
                                    2. Equity shareholders to surrender to the company 80 per cent of their holdings.<\/li>\n
                                    3. Preference shareholders agree to forgo their right on arrears of dividends in consideration of which 7% preference shares are to be converted into 8% preference shares.<\/li>\n
                                    4. Trade payables agree to reduce their claim by one fourth in consideration of their getting shares of \u20b9 5,00,000 out of the surrendered equity shares.<\/li>\n
                                    5. Directors agree to forgo the amounts due on account of loan.<\/li>\n
                                    6. Surrendered shares not otherwise utilized to be cancelled.<\/li>\n
                                    7. Assets to be reduced as under:
                                      \n\"Internal<\/li>\n
                                    8. Trade receivables to the extent of \u20b9 17,00,000 are considered good.<\/li>\n
                                    9. Revalued figures for building is accepted at \u20b9 7,00,000.<\/li>\n
                                    10. Declared dividend is paid to the equity shareholders.<\/li>\n
                                    11. Any surplus after meeting the losses should be utilized in writing down the value of the plant further.<\/li>\n
                                    12. Expenses of reconstruction amounted to \u20b9 60,000.<\/li>\n
                                    13. Further 40,000 equity shares were issued to the existing members for increasing the working capital. The issue was fully subscribed and paid up.<\/li>\n<\/ol>\n

                                      You are required to pass the Journal Entries for giving effect to the above arrangement and also to draw up the resultant Balance Sheet of the Company.
                                      \nAnswer:
                                      \nJournal Entries
                                      \n\"Internal
                                      \n\"Internal
                                      \nNote: There will be no journal entry on cancellation of preference dividend on cancellation.<\/p>\n

                                      Balance Sheet of R Ltd. (and Reduced) as at 31st March, 2017
                                      \n\"Internal<\/p>\n

                                      Notes:
                                      \n(1) Share capital
                                      \n\"Internal<\/p>\n

                                      (4) Cash and cash equivalents
                                      \n\"Internal<\/p>\n

                                      \"Internal<\/p>\n

                                      Question 23.
                                      \nX Limited has decided to reconstruct the Balance Sheet since it has accumulated huge losses. The following is the summarized Balance Sheet of the company as on 31st March, 2017 before reconstruction:
                                      \n\"Internal
                                      \nThe following scheme of internal reconstruction was framed and implemented, as approved by the court and concerned parties:
                                      \n(1) Uncalled capital is to be called up in full and then all the shares to be converted into Equity Shares of \u20b9 40 each.<\/p>\n

                                      (2) The existing shareholders agree to subscribe in cash, fully paid up equity shares of \u20b9 40 each for \u20b9 12,50,000.<\/p>\n

                                      (3) Trade creditors are given option of either to accept fully paid equity shares of \u20b9 40 each for the amount due to them or to accept 70% of the amount due to them in cash in full settlement of their claim. Trade creditors for \u20b9 7,50,000 accept equity shares and rest of them opted for cash towards full and final settlement of their claim.<\/p>\n

                                      (4) Mr. A agrees to cancel debentures amounting to \u20b9 2,00.000 out of total debentures due to him and agree to accept 15% Debentures for the balance amount due. He also agree to subscribe further 15% Debentures in cash amounting to \u20b9 1,00,000.<\/p>\n

                                      (5) Mr. B agrees to cancel debentures amounting to \u20b9 50,000 out of total debentures due to him and agree to accept 15% Debentures for the balance amount due.<\/p>\n

                                      (6) Land & Building to be revalued at \u20b9 51,84,000, Machinery at \u20b9 7,20,000, Computers at \u20b9 4,00,000, Inventories at \u20b9 3,50,000 and Trade receivables at 10% less to as they are appearing in Balance Sheet as above.<\/p>\n

                                      (7) Outstanding Expenses are fully paid in cash.<\/p>\n

                                      (8) Profit & Loss A\/c will be written off and balance, if any, of Capital Reduction A\/c will be adjusted against Capital Reserve.<\/p>\n

                                      You are required to pass necessary Journal Entries for all the above transactions and draft the company\u2019s Balance Sheet immediately after the reconstruction.
                                      \nAnswer:
                                      \nJournal Entries [In the Books of X Ltd.]
                                      \n\"Internal
                                      \n\"Internal<\/p>\n

                                      Balance Sheet of X Ltd. (as reduced) as on 31.3.2017
                                      \n\"Internal<\/p>\n

                                      Notes to accounts
                                      \n\"Internal<\/p>\n

                                      2. Capital Reduction Account
                                      \n\"Internal<\/p>\n

                                      Question 24.
                                      \nThe summarized Balance Sheet of Bad Luck Ltd. as on 31st March, 2013 was as follows:
                                      \n\"Internal<\/p>\n

                                      Notes to Accounts
                                      \n\"Internal
                                      \nThe following scheme of internal reconstruction was framed, approved by the Court, all the concerned parties and implemented:<\/p>\n

                                        \n
                                      1. The preference shares to be written down to \u20b9 25 each and the equity shares to \u20b9 20 each. Each class of shares then to be converted into shares of \u20b9 100 each.<\/li>\n
                                      2. The debenture holders to take over freehold property (book value \u20b9 2,00,000) at a valuation of \u20b9 2,50,000 in part repayment of their holdings. Remaining freehold property to be revalued at \u20b9 6,00,000.<\/li>\n
                                      3. Loan from directors to be waived off in full.<\/li>\n
                                      4. Stock of t 50,000 to be written off, \u20b9 12,500 to be provided forbad debts.<\/li>\n
                                      5. Profit and Loss account balance, Trademark, goodwill and deferred revenue expenditure to be written off.<\/li>\n<\/ol>\n

                                        Pass Journal Entries for all the above mentioned transactions. Also Prepare Capital Reduction account and company\u2019s Balance Sheet immediately after reconstruction. (May 2013) (16 Marks)
                                        \nAnswer:
                                        \nJournal entries in the books of Bad Luck Ltd.
                                        \n\"Internal
                                        \n\"Internal<\/p>\n

                                        (b) Capital Reduction Account
                                        \n\"Internal<\/p>\n

                                        Balance Sheet of Bad Luck Ltd. (And Reduced) As on 31st March, 2013
                                        \n\"Internal<\/p>\n

                                        Notes to Accounts
                                        \n\"Internal<\/p>\n

                                        \"Internal<\/p>\n

                                        Question 25.
                                        \nThe Balance Sheet of X Ltd. as at 31st March, 2014 was as follows:<\/p>\n

                                        X Limited
                                        \nBalance Sheet as at 31.03.2014
                                        \n\"Internal
                                        \nNo Dividend on Preference Shares has been paid for last 5 Years.<\/p>\n

                                        The following scheme of reorganisation was duly approved by the Court:
                                        \n(i) Each equity share to be reduced to \u20b9 25.<\/p>\n

                                        (ii) Each existing Preference Share to be reduced to \u20b9 75 and then exchanged for one new 13% Preference Share of \u20b9 50 each and one Equity Share of \u20b9 25 each.<\/p>\n

                                        (iii) Preference Shareholders have forgone their right for dividend for four years. One year\u2019s dividend at the old rate is however, payable to them in fully paid equity shares of \u20b9 25.<\/p>\n

                                        (iv) The Debenture Holders be given the option to either accept 90% of their claims in cash or to convert their claims in full into new 13% Preference Shares of \u20b9 50 each issued at par. One-fourth (in value) of the Debenture Holders accepted Preference Shares for their claims. The rest were paid in cash.<\/p>\n

                                        (v) Contingent Liability of \u20b9 2,00,000 is payable which has been created by wrong action of one Director. He has agreed to compensate this loss out of the loan given by the Director to the Company.<\/p>\n

                                        (vi) Goodwill does not have any value in the present. Decrease the value of Plant & Machinery, Stock and Debtors by \u20b9 3,00,000; \u20b9 1,00,000 and \u20b9 2,00,000 respectively. Increase the value of Land & Building to \u20b9 25,00,000.<\/p>\n

                                        (vii) 50,000 new Equity Shares of \u20b9 25 each are to be issued at par payable in full on application. The issue was underwritten for a commission of 4%. Shares were fully taken up.<\/p>\n

                                        (viii) Total expenses incurred by the Company in connection with the Scheme excluding underwriting Commission amounted to \u20b9 20,000.
                                        \nPass necessary Journal Entries to record the above transactions. (Nov 2014) (16 Marks)
                                        \nAnswer:
                                        \nIn the books of X Ltd.
                                        \nJournal Entries
                                        \n\"Internal
                                        \n\"Internal
                                        \n\"Internal
                                        \n\"Internal<\/p>\n

                                        \"Internal<\/p>\n

                                        Question 26.
                                        \nThe summarized balance sheet of Z Limited as on 31st March, 2017 is as under:
                                        \n\"Internal
                                        \nNote: Preference dividend is in arrears for last 2 years.<\/p>\n

                                        Mr. Y holds 60% of debentures and Mr. Z holds 40% of debentures. Moreover \u20b9 1,00,000 and \u20b9 60,000 were also payable to Mr. Y and Mr. Z respectively as trade payable.
                                        \nThe following scheme of reconstruction has been agreed upon and duly approved.
                                        \n(i) All the equity shares to be converted into fully paid equity shares of \u20b9 5.00 each.<\/p>\n

                                        (ii) The Preference shares be reduced to \u20b9 50 each and the preference shareholders agreed to forego their arrears of preference dividends, in consideration of which 9% preference shares are to be converted into 10% preference shares.<\/p>\n

                                        (iii) Mr. Y and Mr. Z agreed to cancel 50% each of their respective total debt including interest on debentures. Mr. Y and Mr. Z also agreed to pay \u20b9 1,00,000 and \u20b9 60,000 respectively in cash and to receive new 12% debentures for the balance amount.<\/p>\n

                                        (iv) Persons relating to trade payables, other than Mr. Y and Mr. Z also agreed to forgo their 50% claims.<\/p>\n

                                        (v) Directors also waived 60% of their loans and accepted equity shares for the balance.<\/p>\n

                                        (vi) Capital commitments of \u20b9 3.00 lacs were cancelled on payment of \u20b9 15,000 as penalty.<\/p>\n

                                        (vii) Directors refunded \u20b9 1,00,000 of the fees previously received by them.<\/p>\n

                                        (viii) Reconstruction expenses paid \u20b9 75,000.<\/p>\n

                                        (ix) The taxation liability of the company was settled for \u20b9 75,000 and was paid immediately.<\/p>\n

                                        (x) The Assets were revalued as under:
                                        \n\"Internal
                                        \nYou are required to pass journal entries for all the above mentioned transactions including amounts to be written off of Goodwill, Patents, Loss in Profit and Loss account and Discount on issue of debentures. And also prepare Bank Account and Reconstruction A\/c. (Nov 2017) (16 Marks)
                                        \nAnswer:
                                        \nJournal Entries in the Books of Z Ltd.
                                        \n\"Internal
                                        \n\"Internal<\/p>\n

                                        Bank Account
                                        \n\"Internal<\/p>\n

                                        Reconstruction Account
                                        \n\"Internal<\/p>\n

                                        \"Internal<\/p>\n

                                        Amalgamation + Internal Reconstruction<\/strong><\/p>\n

                                        Question 27.
                                        \nFollowing are the summarized Balance Sheet of Companies K Ltd. and W Ltd., as at 31-12-2011:
                                        \n\"Internal
                                        \nOn 01-04-2012, K Ltd. adopted the following scheme of reconstruction:<\/p>\n

                                          \n
                                        1. Each equity share shall be sub-divided into 10 equity shares of \u20b9 10 each fully paid up. 50% of the equity share capital would be surrendered to the company.<\/li>\n
                                        2. Preference dividends are in arrear for 3 years. Preference shareholders agreed to waive 80% of the dividend claim and accept payment for the balance.<\/li>\n
                                        3. Own debentures of \u20b9 80,000 (nominal value) were sold at \u20b9 98 cum interest and remaining own debentures were cancelled.<\/li>\n
                                        4. Debenture holders of \u20b9 3,00,000 agreed to accept one machinery of book value of \u20b9 3,20,000 in full settlement.<\/li>\n
                                        5. Creditors, Debtors and stock were valued at \u20b9 5,00,000, \u20b9 6,00,000 and \u20b9 4,00,000 respectively. Goodwill, discount on issue of debentures and Profit and Loss account (Dr.) are to be written off.<\/li>\n
                                        6. The company paid \u20b9 20,000 as penalty to avoid capital commitments of \u20b9 4,00,000.<\/li>\n<\/ol>\n

                                          On 02.04.2012, a scheme of absorption was adopted. K Ltd. would take over W Ltd. The purchase consideration was fixed as below:
                                          \n(a) Equity shareholders of W Ltd. will be given 50 equity shares of t 10 each fully paid up, in exchange for every 5 shares held in W Ltd.
                                          \n(b) Issue of 10% preference shares of \u20b9 100 each in the ratio of 4 preference shares of K Ltd. for every 5 preference shares held in W Ltd.
                                          \n(c) Issue of 12% debentures of \u20b9 100 each of K Ltd. for every 12% debenture in W Ltd.
                                          \nPass necessary Journal entries in the books of K Ltd. and draw the resultant Balance Sheet as at 2nd April, 2012. (Nov 2012) (16 Marks)
                                          \nAnswer:
                                          \nIn the books of K Ltd.
                                          \nJournal Entries
                                          \n\"Internal<\/p>\n

                                          \"Internal<\/p>\n

                                          Balance Sheet of K Ltd. as on 2nd April, 2012
                                          \n\"Internal<\/p>\n

                                          Notes to Accounts
                                          \n\"Internal<\/p>\n

                                          Working Notes:
                                          \n1. Computation Purchase Consideration
                                          \n\"Internal<\/p>\n

                                          2. Capital Reserve
                                          \n\"Internal<\/p>\n

                                          \"Internal<\/p>\n

                                          Note. In the question, summarised balance sheets of K Ltd. and W Ltd. as on 31.12.2011 are given. However, the internal reconstruction and amalgamation took place on 1.4.2012 and 2.4.2012 respectively. Since, no information have been provided for the intervening period of 3 months (i.e. from 1.1.2012 to 31.3.2012), the above answer is given assuming this date of summarised balance sheets as 31.3.2012 instead of 31.12.2011.<\/p>\n","protected":false},"excerpt":{"rendered":"

                                          Internal Reconstruction \u2013 CA Inter Advanced Accounting Study Material is designed strictly as per the latest syllabus and exam pattern. Internal Reconstruction \u2013 CA Inter Advanced Accounting Study Material Basic Questions Question 1. Pass journal entries for the following transactions: Conversion of 2 lakh fully paid equity shares of \u20b9 10 each into stock of …<\/p>\n

                                          Internal Reconstruction \u2013 Advanced Accounts CA Inter Study Material<\/span> Read More »<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[167],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/14937"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=14937"}],"version-history":[{"count":2,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/14937\/revisions"}],"predecessor-version":[{"id":15172,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/14937\/revisions\/15172"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=14937"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=14937"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=14937"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}