The following is the Balance Sheet of XYZ Ltd. as at 31st March 2017.
Liabilities | ₹ | Assets | ₹
20,000 Equity shares of ₹ 100 each | 20,00,000 | Goodwill | 25,000
12% Debenture | 5,00,000 | Land & Buildings | 1,50,000
Outstanding debentures interest | 1,20,000 | Plant & Machinery | 3,00,000
Creditors | 3,00,000 | Furniture | 80,000
| | Stock | 2,70,000
| | Debtors | 60,000
| | Cash at Bank | 35,000
| | Preliminary expenses | 20,000
| | Profit & Loss A/c. | 19,80,000
Total: 29,20,000 | Total: 29,20,000
The following is the scheme of reconstruction :
(i) Equity shares are reduced by ₹ 95 per share. They are, then, consolidated into 10,000 equity shares of ₹ 10 each.
(ii) Debenture holders agree to forego outstanding debenture interest. As a compensation, 12% debentures are converted into 14% debentures, the amount remaining ₹ 5,00,000.
(iii) Creditors are given the option to either accept 50% of their claim in cash in full settlement or to convert their claim into equity shares of ₹ 10 each. Creditors for ₹ 2,00,000 opt for shares in satisfaction of their claims.
(iv) To make payment to creditors opting for cash payment and to augment working capital, the company issues 50,000 equity shares of ₹ 10 each at par, the entire amount being payable along with applications. The issue was fully subscribed.
(v) Land and Buildings are revalued at ₹ 2,00,000 whereas plant and machinery is to be written down to ₹ 2,10,000. A provision amounting to ₹ 5,000 is to be made for doubtful debts.
Pass necessary journal entries and prepare the company's balance sheet immediately after the reconstruction.