Bangalore University 2008-4th Sem B.Com English

iii) Payment of cash to the equity shareholders for the balance of purchase consideration
J Ltd., discharged the creditors at a discount of Rs. 5,000 and incurred an expenditure of Rs. 7,500 towards liquidation proceedings.

Pass necessary journal entries in the books of J Ltd.

12. Following is the Balance Sheet of L Ltd., as at 31-03-2008
Liabilities Rs. Assets Rs.
Equity Shares of Rs.10 every 3, 00,000 Land and Buildings 2, 00,000
10% Debentures 1, 50,000 Plant and Machinery 60,000
Creditors 50,000 Stock 60,000
Debtors 35,000
Cash 5,000
P & L A\c 1, 40,000

5, 00,000 5, 00,000

The company went into voluntary liquidation and a new company called M Ltd., was formed. The scheme of reconstruction is as under:

a) The new company to have authorized capital of Rs. 10,00,000 consisting of 1,00,000 equity shares of Rs. 10 every
b) The new company to take over the assets at their book values and discharge 10% debentures by the problem of equal number of 8%
c) The creditors to be discharged by the problem of 4,000 equity shares of Rs.10 every in full settlement of their claims
d) The entire purchase consideration is to be discharged by the problem of sufficient number of equity shares of M Ltd.
e) Liquidation expenses of L ltd., Rs.3, 000 to be met by M Ltd.
f) The new company to problem 15,000 new shares to the public at par and purchase new plant and machinery at a cost of Rs. 1,25,000

Prepare Realisation A/c and Equity shareholders A/c in the books of L Ltd., and pass journal entries and prepare Balance Sheet in the books of M Ltd.

13. Following is the Balance Sheet of N Ltd., as at 31-03-2008

Liabilities Rs. Assets Rs.
12,000 7% Preference
Share capital (Rs.50 each) 6, 00,000 Buildings 2, 00,000
15,000 Equity shares of Plant 3, 00,000
Rs.50 every fully paid 7, 50,000 Good will 4, 00,000
12% Loan creditors 5, 75,000 Stock 4, 00,000
Trade creditors 2, 00,000 Debtors 3, 00,000
Other current liabilities 40,000 Preliminary Expenditure 15,000
P & L A/c 5, 50,000

21, 65,000 21,65,000

The company adopted a scheme of internal reconstruction as under:
1) The equity shares to be decreased to Rs. 2.50 every fully paid and the equity shareholders to subscribe to new equity shares of Rs.2.50 every at the rate of 3 shares for 1 share held.

2) The preference dividend which is in arrears for 3 years to be cancelled against the problem of 2 new equity shares for every Rs. 100 dividend in arrears.

3) The preference shares to be decreased to 10% preference shares of Rs. 10 every fully paid and preference shareholders to subscribe to new equity shares of Rs.2.50 every at the rate of 2 shares for 1 share held.

4) 12% Loan creditors to forego Rs.1, 25,000 and accept 10% preference shares of Rs.10 every fully paid for the balance of claim. They also agree to subscribe 12,000 new equity shares of Rs.2.50

5) The Directors of the company to subscribe 40,000 equity shares of Rs.2.50 every.

6) Trade creditors to sacrifice 10% of their claim and be paid immediately 50% of the remaining claim.
7) The intangible and fictitious assets to be written off completely and the balance be
Utilized to write off plant and stock in proportion to their book values.

Pass journal Entries and Prepare Reconstructed Balance Sheet.

14. O Ltd., went into voluntary liquidation on 31-03-2008 on which date its Balance Sheet
Showed the subsequent figures.

Liabilities Rs. Assets Rs.
6,250 6% cumulative Sundry Assets 17, 00,000
Preference shares of Rs.100 Cash 80,000
every fully paid 6, 25,000 P & L A/c 4, 30,000

4,000 Equity Shares of
Rs.100 every fully paid 2, 40,000

8,000 Equity shares of
Rs.100 every Rs.70 paid 5, 60,000

5% Mortagage debentures 4, 00,000

Creditors 3, 85,000


22, 10,000 22, 10,000

Sundry assets realized 70% of their book value. Liquidator is entitled to a remuneration of 3% on assets realized excluding cash and 4% on amount distributed to unsecured creditors other than preferential creditors. Of the total creditors Rs.2, 25,000 is secured and Rs.30, 000 is preferential. The preference dividends were in arrear for two years and are payable on liquidation. Liquidation expenses Rs. 35,000. Prepare Liquidators final Statement of Account.




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Earning:   Approval pending.