The following is the balance sheet of Weak Ltd., on 31-3-2003Liabilities20,000 Equity shares of Rs.10 each 2,00,000 Patents500 10% Pref. Shares of Rs.100 each 50,000 Buildings8% DebenturesCreditorsOutstanding expensesRs.AssetsRs.40,0002,00,0001,30,00080,00055,000Profit & loss A/c1,95,0007,00,0001,00,000 Machinery3,30,000 Stock20,000 Debtors7,00,000With a view to reconstruct the company, it is proposed:(i) To reduce Equity share paid up amount by Rs.9 each.(ii) To reduce 20% Preference shares by Rs.40 each.(iii) To reduce 8% Debentures by 10%.(iv) To reduce Trade creditors’ claim by one Third.(v) To reduce machinery by Rs.60,000.(vi) To reduce inventory by Rs.10,000.(vii) To provide Rs.15,000 for bad debts.(viii) To write off all the intangible assets.Pass journal entries to give effect to the above scheme and showthe company's balance sheet after reconstruction.

Reconstruction: It is a process of reorganizing the affairs of a company by revaluing the assets,…

The following is the balance sheet of Weak Ltd., on 31-3-2003 Liabilities 20,000 Equity shares of Rs.10 each 2,00,000 Patents 500 10% Pref. Shares of Rs.100 each 50,000 Buildings 8% Debentures Creditors Outstanding expenses Rs. 40,000 2,00,000 1,30,000 80,000 55,000 Profit & loss A/c1,95,000| |7,00,000 Rs. Assets 1,00,000 Machinery 3,30,000 Stock 20,000 Debtors 7,00,000 With a view to reconstruct the company, it is proposed: (1) To reduce Equity share paid up amount by Rs.9 each. (ii) To reduce 20% Preference shares by Rs.40 each. (iii) To reduce 8% Debentures by 10%. (iv) To reduce Trade creditors' claim by one Third. (v) To reduce machinery by Rs.60,000. (vi) To reduce inventory by Rs.10,000. (vii) To provide Rs.15,000 for bad debts. (viii) To write off all the intangible assets. Pass journal entries to give effect to the above scheme and show the company's balance sheet after reconstruction.

The following is the balance sheet of Weak Ltd., on 31-3-2003 Liabilities 20,000 Equity shares of Rs.10 each 2,00,000 Patents 500 10% Pref. Shares of Rs.100 each 50,000 Buildings 8% Debentures Creditors Outstanding expenses Rs. 40,000 2,00,000 1,30,000 80,000 55,000 Profit & loss A/c1,95,000| |7,00,000 Rs. Assets 1,00,000 Machinery 3,30,000 Stock 20,000 Debtors 7,00,000 With a view to reconstruct the company, it is proposed: (1) To reduce Equity share paid up amount by Rs.9 each. (ii) To reduce 20% Preference shares by Rs.40 each. (iii) To reduce 8% Debentures by 10%. (iv) To reduce Trade creditors' claim by one Third. (v) To reduce machinery by Rs.60,000. (vi) To reduce inventory by Rs.10,000. (vii) To provide Rs.15,000 for bad debts. (viii) To write off all the intangible assets. Pass journal entries to give effect to the above scheme and show the company's balance sheet after reconstruction.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.

Question

The following is the balance sheet of Weak Ltd., on 31-3-2003
Liabilities
20,000 Equity shares of Rs.10 each 2,00,000 Patents
500 10% Pref. Shares of Rs.100 each 50,000 Buildings
8% Debentures
Creditors
Outstanding expenses
Rs.
Assets
Rs.
40,000
2,00,000
1,30,000
80,000
55,000
Profit & loss A/c1,95,000
7,00,000
1,00,000 Machinery
3,30,000 Stock
20,000 Debtors
7,00,000
With a view to reconstruct the company, it is proposed:
(i) To reduce Equity share paid up amount by Rs.9 each.
(ii) To reduce 20% Preference shares by Rs.40 each.
(iii) To reduce 8% Debentures by 10%.
(iv) To reduce Trade creditors’ claim by one Third.
(v) To reduce machinery by Rs.60,000.
(vi) To reduce inventory by Rs.10,000.
(vii) To provide Rs.15,000 for bad debts.
(viii) To write off all the intangible assets.
Pass journal entries to give effect to the above scheme and show
the company's balance sheet after reconstruction.

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