Depression Ltd. decided to reorganise its structure following a period of adverse trading conditions. The Balance Sheet of the company as on 31st March, 2016 showed the following:

Preference dividends are in arrears for four years. Subsequent to approval by the Tribunal of a scheme for the reduction of capital, the following steps were taken:
(i) The Preference Shares were reduced to ₹ 0.75 per share, and the Ordinary Shares to Re 0.10 per share. After reduction the shares were consolidated into Re 1 shares. The authorised capital was restored to 2,00,000, 8% Cumulative Preference Shares and 1,50,000 Ordinary Shares, both of ₹ 1 each.
(ii) 1 new Ordinary Share of ₹ 1 was issued for every ₹ 4 of gross preference dividend in arrears.
(iii) The balance on Securities Premium Account was utilised.
(iv) The debentureholders took over the freehold property at an agreed figure of ₹ 75,000 and paid the balance to the company after deducting the amount due to them.
(v) Plant and Machinery was written-down to ₹ 1,40,000.
(vi) Trade Investment was sold for ₹ 32,000.
(vii) Goodwill, Preliminary Expenses, debt of ₹ 8,600, and Obsolete Stock of ₹ 10,000 were written-off.
(viii) A contingent liability for which no provision had been made was settled at ₹ 7,000 and of the amount ₹ 6,300 was recovered from the insurers.

You are required:
(a) To show the Journal Entries necessary to record the above transactions in the company’s books, and
(b) To prepare the Balance Sheet, after completion of the scheme.

Transcribed Image Text:

I. EQUITY AND LIABILITIES (1) Shareholders' Funds: (a) Share Capital (b) Reserves and Surplus Securities Premium Profit and Loss Account Balance Sheet of Depression Ltd. as at 31st March, 2016 (2) Share Application Money Pending Allotment : (3) Non-current Liabilities: (a) Long-term Borrowings --- 9% Debentures (Secured on freehold property) (4) Current Liabilities: TOTAL II. ASSETS (1) Non-current Assets: (a) Fixed Assets (a) Short-term Borrowings --- Bank Loan (b) Trade Payables --- Creditors (c) Other Current Liabilities - Accrued Interest on Debentures (i) Tangible Assets: Particulars (1) (b) Non-current investments (2) Current Assets : TOTAL Freehold Property at Cost Leasehold Property Plant and Machinery (ii) Intangible Assets -- Goodwill at Cost (a) Inventories (b) Trade Receivables ---Debtors Note No. (2) (1) Amount (₹) (3) 3,50,000 5,000 (71,700) 60,000 96,000 85,000 2,700 5,27,000 60,000 1,22,000 1,60,000 55,000 40,000 30,000 60,000 5,27,000