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External Reconstruction

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On 1st July, 2017 the balance sheet of Amrit Limited was as under:

Liabilities Rs. Assets Rs.
Authorised and Issued Capital :   Goodwill 1,00,000
3,000 6% Cumulative Preference 75,000 Sundry Assets 2,50,000
Shares of Rs25 each fully paid   Cash 10,000
8,000 Equity Shares of Rs 50 each fully paid 4,00,000 Profit and Loss A/c 1,90,000
60 % Debentures 50,000    
Creditors 25,000    
  5,50,000   5,50,000

Preference dividends. were in arrears for two years. A scheme of  reconstruction agreed upon was as under :

(1)· company to be formed, called AmritLiinited with an authorised capital of Rs.5,00,000  an in equity shares of Rs. 100 each.
(2) One equity shar.e of Rs.100 each fully paid in ·the new company to be issued in exchange of 3 preference shares in the old company. 
(3) One equity share of Rs. 100 each fully paid in the new company to be exchanged for 4 equity shares In the old company.
(4) Arrears of preference dividend to be cancelled.
(5) Debentureholders to receive 50 equity shares in the new company as fully paid.
(6) Creditors to be taken over by the new company and immediately paid-off 
(7) The new company to issue remaining equity shares. for public subscription.
(8) The new company to take over old companis assets,subject to revaluation of  'Sundry Assets' at Rs. 2,65,000.
Prepare the  necessary ledger account in the books of Amrit Limited  and open the books of the new company by means of journal entries, assuming that the public subscription was fully responded.

Balance Sheet of K.G.Ltd. as on 31-12-2017

Liabilities  Rs. Assets Rs.
Share Capital 1,10,00,000 Block Account 84,50,000
5% Debentures 10,00,000 Stocks 18,00,000
Interest accrued on  2,00,000 Book Debts 10,00,000
Creditors 8,00,000 Investments 2,00,000
    Cash 50,000
    Profit and Loss A/c 15,00,000
  1,30,00,000   1,30,00,000

It is decided to reconstruct the company and for this purpose the following scheme was duly approved.

(1) A new company under the name 'Krishna Ltd.' is to be formed  with  an authorized capital of Rs. 1,00,00,000 in shares of Rs.10 each to take over the business.
(2) Ten fully paid shares in the new company ate to be issued for every six ordinary shares in the old company.
(3) Fifteen fully paid shares in new company are to be issued for every five preference shares in old company.
(4) Debentures are to be paid-off by the new company at a premium of 10%.

(5) Creditors are  to receive 80% of their claim in fully paid shares in the new company in full settlement.
(6) The arrears  of preference hare dividends are to ~e discharged by the issue of three fully paid shares in the new company' for each Preference shares in the old company.
(7) The liquidation expenses of the old company amoμnting to Rs. 5,000 are to be paid by the new company. 
(8) The Authorized and Issued Share Capital of the ·company consist of 50,000 .6%  Preference Shares of Rs100 each fully:-paid, and 60,000 Ordinary Shares of  Rs 100 each fully paid. The dividend on cumulative Preference· Shares has been in arrears for several years.
Close the books of K.G. Ltd

Following was the Balance sheet of DT Ltd. as on 30th June, 2018 :

Liabilities Rs Assets Rs
Share Capital:   Goodwill  25,000
2,500 8% CumulativePreference Shares of Rs 100 each   Fixed Assets 12,85,000
12,000 Equity Shares of Rs. 100 each   Stock 3,,03,000
9% Debentures   Debtors 2,50,000
Interest Accrued thereon 45,000 BankBalance 7,000
Creditors 5,00,000 Prelhninary Expenses 25,000
    Profit and Loss A/c 6,00,000
  24,95,000   24,95,000

Note : Preference dividend was in arrears RS.40,000.
The following Scheme of reconstruction is duly sanctioned :
1. A new company TD Ltd .is formed With Rs .15,00,000 as authorised share capital divided into 1,50,000 equity shares of Rs. 10 each.
2. The company will acquire DT Ltd. on the following conditions : 
(i) Old companies debentures will be paid by similar debentures in the new company. For arrears of interest, equivalent amount of·equity shares will be issued .
(ii) The cr~ditors ·wlll be paid fof. every Rs 100 for their claim, Rs .16 in cash and 10 equity shares equivalent in the new company.
(iii) Preference shareholders are pfild 10 equity shares in the new company for  each shares them in the old company. They will not press-for their dividend arrears.
(iv) Equity shareholders will be given ten equity shares in the new company. for three shares held in the old company.
(v) Expenses. of Rs. 20,000 will be borne. by the new company, as a part of purchase consideration..
3. The riew company will take the current assets at their book value except stock which will be reduced by Rs.15,000. Intangible assets are not to appear in the new Balance Sheet, appropriate adjustment being made in the values of fixed assets ..
4. Remaining equity shares in the new company are issued to the public and are fully paid.
You are required to prepare:
1. In the books ·of DT Ltd :
(i) Realisation Account
(ii) DT Equity Sharehoiders Account.
2. In the books of TD Ltd. 
(i) Journal Entries .
(ii) Balance Sheet.
Under Purchase Method.

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