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CA RAJESH NANGALIA 9903133927

CU-VEDAS

2005
The following is the Balance Sheet of Titanic Ltd. as on March 31, 2004:
Particulars Amount
I . EQUITY AND LIABILITIES
(1) Shareholder’s funds
a) Share capital
Equity shares of Rs.10 each 6,00,000
8% preference shares Rs.100 each, fully paid up 2,00,000
b) Reserves and Surplus
General reserves 1,50,000
Profit & loss A/c (1,20,000)
(2) Non-current liabilities
a) Long- term borrowings
6% debentures (Rs.100 each) 1,00,000
(3) Current liabilities
a) Trade payables:
Creditors 40,000
TOTAL 9,70,000
II. ASSETS
(1) Non-current assets
a) Fixed assets 3,00,000
(2) Current assets
a) Inventories
stock 3,25,000
b) Trade receivables
Trade debtors 2,75,000
c) Cash and cash equivalents
Cash 70,000

TOTAL 9,70,000
During the last few years the company passed through very bad times. It now puts the following scheme of
reconstruction after the approval of the court:
a) Each existing equity share to be converted into one equity share of the nominal value of Rs.3 per share.
b) 8% preference shares are to be converted into such number of 16% preference shares of Rs.100 each as to
generate the same amount of dividend as before.
c) Each Rs.100 of debentures is to be exchanged for one Rs.50 new 12% debentures and six new equity shares of
Rs.3 each.
The reduction of Capital & Reserves are to be utilized for writing of losses, 60% of stock & debtors and the balance, if
any, is to be used for writing down fixed assets.
Show the necessary journal entries and draw up the revised Balance Sheet.

2007
The position (besides accumulated loss) of Sunset ltd. as on 31.03.06 was as follows:
Rs.
50,000 equity shares of Rs.100 each 50,00,000
25,000, 9% preference shares of Rs.100 each 25,00,000
Preference dividend in arrears (not shown in Balance sheet) 4,50,00
Creditors 12,50,000
Fixed assets 50,00,00
Current assets 16,25,000
The following scheme of reconstruction was adopted:

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CA RAJESH NANGALIA 9903133927
i) Fixed assets and current assets were revalued at Rs.30,00,000 and Rs.12,50,000 respectively.
ii) The equity shares were subdivided into share of Rs.5 each and 80% of these shares were surrendered.
iii) The preference shareholders claim was reduced by 50% and in consideration they were allotted equity shares
out of shares surrendered account amounting to Rs.6,25,000
iv) The creditors agreed to reduce their claim by Rs.7,50,000, one third of which was satisfied by the issue of
equity shares out of those shares surrendered.
v) The remaining surrendered shares were cancelled
Pass journal entries and prepare the balance sheet just re-construction.

2008
The balance sheet of Eknath & co. as on 31.12.2007 is as follows:
Particulars Amount
I. EQUITY AND LIABILITIES
(1) Shareholders’ funds
a) Share capital
70,000 equity shares of Rs.10 each 7,00,000
5,000 cumulative preference shares of Rs.100 each 5,00,000
b) Reserves and surplus
Profit & loss A/c (4,50,000)
(2) Non-current liabilities
a) Long term borrowings 4,00,000
6% debenture
(3) Current liabilities
a) Short-term borrowings 2,66,000
Bank overdraft
b) Trade payables:
Creditors 3,30,000
c) Other current liabilities
Accrued interest 24,000
17,70,000
II.
ASSETS
(1)
Non-current assets
a) Fixed assets
i) Tangible assets
Land
5,00,000
Plant
1,00,000
ii) Intangible assets
38,000
Patent
1,22,000
Goodwill
b) Non- current investments
60,000
(2) Investment
Current assets
a) Inventories
stock
4,00,000
b) Trade receivables
Debtors
4,50,000
c) Short term loans and advances
Deferred advertising
1,00,000

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CA RAJESH NANGALIA 9903133927

TOTAL 17,70,000
The court approved a scheme of re-organization to take effect on 1.1.2008, whereby:
i) The Preference shares are to be written down to Rs.75 each and equity shares to Rs.1 each.
ii) Preference dividend were in arrear for 4 years. It was decided to waive 3/4 th and equity shares and Rs.1 each
to be allotted for the remaining quarter.
iii) Accrued interest on debentures are to be paid in cash
iv) Investments are to be sold for Rs.1,00,000
v) Amount of Rs.9,000 is to be provided for bad debts.
vi) Patents, goodwill, and deferred advertising are to be written off.
vii) Plant is valued at Rs. 78,000
You are asked to show journal entries of the above transactions in the books of the company.

2009
The following was the Balance sheet of a sick company ltd. as on 31st December 2008:
Particulars Note
I. EQUITY AND LIABILITIES
(1) Shareholders’ funds
a) Share capital 1 3,33,000
b) Reserves and surplus 2 62,400
(2) Current liabilities
a) Short term borrowings
b) Trade payables:
Creditors 46,275
c) Other current liabilities
d) Short – term provisions
Provisions for tax 12,000
TOTAL 3,28,875
II. ASSETS
(1) Non-current assets
a) Fixed assets
i) Tangible assets
Land & buildings 61,500
Plant & machinery 1,52,550
ii) Intangible assets
Goodwill 30,000
(2)
Current assets
a) Inventories
Stock 30,825
b) Trade receivables
Book debts 45,000
c) Cash and cash equivalents

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CA RAJESH NANGALIA 9903133927
Cash at bank 4,500
d) Other current assets
Preliminary expenses 4,500
TOTAL 3,28,875
Notes to accounts:
Note Particulars Amount Amount
no.
1. Share capital:
a) Authorized capital
60,000 equity shares of Rs. 10 each 6,00,000
6,00,000
b) Issued, subscribed & paid up capital:
i) 36,000 equity shares of Rs. 10 each 3,60,000
Less: calls in arrear (Rs.3 per share on 9,000 shares) 27,000 3,33,000

2. Reserve & surplus

Profit and loss A/c: 68,700
Balance as per last balance sheet 6,300
Less: profit for the year 62,400

The directors have had a valuation made of the machinery and find it over valued by Rs.30,000. It is proposed to write
down this asset to its true value and to extinguish the deficiency in the Profit & Loss Account and to write off
goodwill and preliminary expenses, by the adoption of the following course:
i) Forfeit the shares on which the call in outstanding
ii) Reduce the paid up capital by Rs.3 per share
iii) Reissue the forfeited shares at Rs.5 per share
iv) Utilize the provision for taxation, is necessary
The shares on which the calls were in arrear were duly forfeited and reissued on payment of Rs.5 per share. You are
required to draft the journal entries necessary to carryout terms of the scheme.

2012
The balance sheet of bad luck ltd. as on 31.03.2011 was as follows:
Balance sheet
As at 31/03/2011 (and reduced)
Sl. Particulars Notes Amount (‘)
No. no.
I. EQUITY AND LAIBILITIES
1. Shareholders’ funds:
a) Share capital 20,00,000
b) Reserve and surplus 3,60,000
2. Current liabilities:
a) Short term borrowings 2,00,000
b) Trade payables 12,00,000
c) Other current liabilities 2,80,000
Total 40,40,000
II. Assets
1. Non current assets:
a) Fixed assets(tangible) 12,40,000
b) Fixed assets (intangible) 2,00,000
other non-current assets 20,000
2. Current assets:
a) Inventories (stock) 6,00,000
b) Trade receivables 10,00,000
c) Cash & cash equivalent 1,80,000
d) Other current assets 8,00,000

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CA RAJESH NANGALIA 9903133927
Total 40,40,000
Note to accounts:
Note Particulars Amount Amount
no.
1. Share capital:
a) Authorized capital
b) Issued, subscribed & paid up capital:
i) 1,20,000 equity shares of V10 each 12,00,000
ii) 8,000 11% preference share capital Rs.100 each 8,00,000
20,00,000
2. Reserve and surplus
a) Securities premium 1,80,000
b) Capital reserve 1,80,000
Total 3,60,000
3. Short term borrowings
Unsecured loan from managing director 2,00,000
4. Trade payables
Sundry creditors 12,00,000
5. Other current liabilities
Outstanding expenses 2,80,000
6. Fixed assets tangible:
a) Land & building 4,00,000
b) Plant & machinery 8,00,000
c) Furniture 40,000
7. 12,40,000
Fixed assets intangible
Goodwill
8. 2,00,000
Other non current assets
Preliminary expenses
9. 20,000
Trade receivables:
a) Debtors 8,00,000
b) Bill receivable 2,00,000
10,00,000
10
Cash and cash equivalents:
11. Cash at bank 1,80,000
Other current assets
Profit and loss account(loss) 8,00,000

The following scheme of reconstruction has been agreed upon and duly approved by the court-
a) Equity shares are to be converted in 6,00,000 shares of Rs.2 each and 90% were surrendered
b) Dividend on cumulative preference share are in arrear for 3 years and preference shareholders agree to forego
their arrear dividends claims for consideration of being conversion of 10% preference shares into 11%
preference share
c) Creditors agree to reduce their claim by 20% for consideration of getting Rs.1,40,000 out of the surrendered.
d) Managing director forgoes his claim
e) Assets are to be written off:
Goodwill by Rs.2,00,000, plant by Rs.2,00,000; furniture by Rs.32,000; debtors by Rs.1,40,000
f) Land and building of be increased to Rs.4,40,000
g) Reconstruction expenses paid Rs.40,000
h) 2,000 13% debentures of Rs.100 each are issued for increasing working capital
i) Balance of shares surrendered will be cancelled
Show journal entries and balance sheet after reconstruction.

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CA RAJESH NANGALIA 9903133927
2013
The ledger balances of Sick ltd. as on 31.03.13 include:
(in’)
Fixed assets 8,00,000
Investments 10,000
Inventories (market value Rs. 3,40,000) 3,90,000
Debtors 4,60,000
Preliminary expenses 20,000
Bank overdraft 50,000
10% 1st debentures 2,00,000
12% 2nd debentures 5,00,000
Creditors(including Y for Rs.5,50,000) 11,50,000
Outstanding debenture interest (1st debentures Rs.20,000 2nd debentures Rs.60,000) 80,000
Equity share (face value Rs.100, 60% paid up) 6,00,000
Due to heavy accumulated losses and overvaluation of fixed assets, following scheme of reconstruction is agreed
upon-
a) To make call against the existing equity shares to make them fully paid up and then to subdivide them to
shares of Rs.20 each.
b) After subdivision the equity shareholders to surrender 80% of their holding for redistribution or otherwise for
cancellation.
c) To settle the claim (including interest) of the holders of the 1st debentures by issuing 1,000, 13.5% debentures
of Rs.100 each. They are also to be issued 3,000 equity shares out of surrendered shares.
d) To issue 15,000 equity shares out of surrendered shares to the holders of the 2nd Debentures in full settlement
of their claim (including interest)
e) To issue 10,000 equity shares out of surrendered shares to Y in full settlement of his account; pass necessary
journal entries (without narration) to give effect to the above transactions and prepare the Balance Sheet of the
company immediately after the reconstruction.

2014
The following is the Balance Sheet of Y ltd. as at 31st march, 2014
Particulars
I. EQUITY AND LIABILITIES
(1) Shareholders’ funds
a) Share capital
80,000 equity shares of Rs.10 each 8,00,000
4,000, 8% preference shares of Rs.100 each fully paid 4,00,000
b) Reserves and surplus
Profit & loss A/c – balance (4,40,000)
Less : profit for the year 80,000 (3,60,000)
(2) Non-current liabilities
a) Long term borrowings
6% debentures 2,00,000
(3) Current liabilities
a) Short term borrowings
Bank overdraft 1,00,000
b) Trade payables:
Creditors 40,000
c) Other current liabilities
Interest due on debentures 60,000
d) Short-term provisions
TOTAL 12,40,000
II.
ASSETS
(1)
Non-current assets
a) Fixed assets
i) Tangible assets
ii) Land & building 6,00,000
iii) Plant & machinery 2,00,000
b) Non-current investments

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CA RAJESH NANGALIA 9903133927
Investments 1,00,000
(2) Current assets
a) Inventories
Stock 2,40,000
b) Trade receivables
Debtors 80,000
c) Cash and cash equivalents
Cash 20,000
TOTAL 12,40,000

The preference dividends are in arrear for three years. Considering the improvement made in the working of the
company, the directors decide upon a scheme of reconstruction with a reduction of capital and it is approved on the
following terms:
a) The preference shareholders agree that their shares be reduced to a fully paid share of Rs.90 each. They will
accept Equity Shares of Rs.4 each fully paid for half of their arrear dividends and rest half will be forgone.
b) The equity shareholders agree that their shares be reduced to fully paid shares of Rs.4 each and further
subscribe 40,000 Equity shares of Rs.4 each fully paid for working capital purposes
c) The debenture holders have agreed to accept fully paid equity shares for the interest due to them
d) Investments are to be sold for Rs.90,000 and money thus available along with new issues be utilized to pay off
Bank overdraft.
Show the necessary journal entries to record the scheme of capital reduction and draw up a new Balance Sheet after
the scheme after taking into accounts: (i) plant and machinery be depreciated by 10% (ii) obsolete stock of Rs.30,000 be
written off:

2015
Following are the balance of X ltd. as on 31.03.15
(In’)
Fixed assets 16,00,000
Investments 20,000
Inventories (market value Rs.6,80,000) 7,80,000
Debtors 9,20,000
Discount on shares 40,000
Bank overdraft 1,00,000
8% ‘A’ debentures 4,00,000
10% ‘B’ debentures 10,00,000
Sundry creditors (including ram for Rs.11,00,000) 23,00,000
Accrued debentures interest
‘A’ debentures Rs.40,000
‘B’ debentures Rs.1,20,000 1,60,000
Equity share capital
(20,000 share of 100 each, Rs.60 paid-up) 12,00,000
Due to accumulated losses and overvaluation of fixed assets, following scheme of Reconstruction is agreed upon-
i) To make call against the existing equity shares to make them fully paid and then to subdivide them to shares
of Rs.20 each.
ii) After sub-division the equity shareholders to surrender 80% of their holding for redistribution or otherwise
for cancellation.
iii) To settle the claim (inclusive of interest) of the holders of Debentures ‘A’ by issuing 2000, 12% Debentures of
Rs.100 each. They are also to be issued 6,000 equity shares out of surrendered shares.
iv) To issue 30,000 equity share out of surrendered shares to the holders of Debentures ‘B’ in full settlement of
their claim (inclusive of interest)
v) To issue 20,000 equity shares out of surrendered shares to ram in full settlement of his account.
vi) To write off all accumulated losses, fictitious assets and writing down the fixed assets to the possible.
Pass necessary journal entries (without narration) to give effect to the above transactions and prepare the balance
sheet of X ltd. after reconstruction.

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CA RAJESH NANGALIA 9903133927
2016
Green ltd. has decided to reconstruct the Balance Sheet since it had accumulated huge losses. The following is the
Balance Sheet of the Company on 31.3.15 before reconstruction.
Particulars
I. EQUITY AND LIABILITIES:
1. Shareholders fund:
a) 60,000 equity shares of Rs.10each fully paid up 6,00,000
4000, 12% preference shares of Rs.100 each fully paid up 4,00,000
b) Reserves and surplus
Profit and loss balance (1,65,000)
2. Non-current liabilities:
11% Debentures 2,50,000
3. Current liabilities:
Trade payables (sundry creditors) 45,500
Bank overdraft 1,36,750
TOTAL 12,67,250
II. ASSETS:
1. Non-current assets:
i) Fixed assets
a) Tangible:
Land and building 5,00,000
Plant and machinery 2,75,000
Furniture 32,500
b) Intangible:
Goodwill 1,50,000
ii) Non-current investment Nil
2. Current assets:
Inventories 2,63,000
Trade receivables (sundry debtors) 46,000
Cash and cash equivalent 750
TOTAL 12,67,250
NOTE : The preference dividends are in arrear for five years
i) A capital reduction scheme is submitted as follows:
ii) Equity shares to be reduced to Rs.5 each.
iii) All arrears of preference dividends to be cancelled
iv) Each preference shares to be reduced to Rs.75 and then exchanged for one new 12% preference share of Rs.50
each and five equity shares of Rs.5 each.
v) The debit balance i.e. the negative balance of profit and loss to be written off. Plant and machinery to be
written down as much as possible. Goodwill is to be written off in full.
vi) The debentures are to be redeemed at 5% premium. Holders being given the option to subscribe at par for
new 12% debentures.
Approval of the court is obtained. 2,00,000 new equity shares are issued at par payable in full on application. Holders
of old debentures to the extent of Rs.1,00,000 exercised their option and subscribed for new debentures. Expenses in
connection with the scheme amounted to Rs.6,750.
Show the journal entries (without narration) and set out the new Balance sheet of the company.

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CA RAJESH NANGALIA 9903133927
2017
The following was the statement as Assets and Liabilities of KB ltd. as on 31.03.2017:
Particulars Note no. Amount
I. EQUITY AND LIABILITIES
1. Shareholders fund:
a) Share capital 1 2,22,000
b) Reserves and surplus 2 (44,600)
2. Non-current liabilities:
10% debentures 50,000
3. Current liabilities
Accrued debenture interest 5,000
Trade payables (Creditors) 30,850
Short term provisions (provision for taxes) 8,000
TOTAL 2,71,250
ASSETS:
1. Non-current assets:
Fixed assets:
i) Tangible assets 3
1,92,700
ii) Intangible assets (goodwill) 25,000
2. Current assets:
i) Inventories (stock) 20,550
ii) Trade receivables (debtors) 30,000
iii) Cash and cash equivalents 3,000
TOTAL 2,71,250
NOTES TO ACCOUNTS:
1. Share capital:
a) Authorized:
40,000 equity shares of Rs. 10 each 4,00,000
b) Subscribed :
i) Subscribed and fully paid up 18000 equity shares @ Rs.10 each 1,80,000
ii) Subscribed but not fully paid up:
6000 equity shares @ Rs.10 each 60,000
Less: calls-in-arrear 18,000
42,000
2,22,000
2. Reserve and surplus:
Balance in statement of profit & loss (44,000)
Add: loss for the year (600)
(44,600)

3. Fixed assets- tangible assets:

a) Land and building 91,000
b) Plant and machinery 1,01,700
1,92,700
(N.B. figures in the parenthesis represent loss)
The directors have had a valuation made of the plant and machinery and find it overvalued by Rs.20,000. It is
proposed to write down this asset to its true value and to extinguish the deficiency in the statement of profit and loss
and to write off goodwill. For this purpose a reconstruction scheme is adopted by the company on the following
terms:
i) Forfeit the shares on which the call is outstanding
ii) Reduce the paid up capital by Rs.3 per share
iii) Reissue the forfeited shares at Rs.5 per share Rs.7 paid up
iv) Use the accrued debenture interest foregone by the debenture holders
v) Utilize the provision for taxation if necessary.
Draft the necessary journal entries and the new Balance sheet of KB ltd. after implementation of the reconstruction
scheme.

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