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Doubt in Internal Reconstruction.....

CA Ragini (CA) (405 Points)

25 July 2011

The balance sheet as at 31st march 2006 is given-

6% CUM PREF SHARES OF 100 EACH 100000.00

The following scheme of reorganisation is santioned as under-

The treatment for preference shares is given as, The pref shares are converted from 6% to 15% but revalued in a manner in which the total return on them remains unaffected.

PLEASE TEL ME HOW TO CALCULATE THE NO. OF NEW PREFERENCE SHARES ALONG WITH STEPS AND WHAT AMT WILL BE TRANSFERRED TO RECONSTRUCTION ACCOUNT.

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8 Replies

sneha (CA) (96 Points)
Replied 25 July 2011

400 shares of Rs 100 each...

1 Like

nimish solanki (IPCC CLEARED) (108 Points)
Replied 25 July 2011

I think 1000 15% pref.shares of rs. 40 each

as they are to be converted in a maner dat return remains same.

previous return 100*6%=rs.6 ,hence new return should also be 6

so revalued amt.=6*100/15=40

and rs. 60000 will go to reconstruction a/c

1 Like

kamal kishor sen (STUDENT Rajasthan) (2156 Points)
Replied 25 July 2011

6% preference share of100 each = 1,00,000

Number of shares = 1,000

Return ( 6% on 1,00,000) = 6,000

The pref shares are converted from 6% to 15% but revalued in a manner in which the total return on them remains unaffected.

i.e. 6,000/15% = 40,000

Number of prefernce shares = 400 (40,000/100)

i.e. 15% preference share capital @ 100 each = 40,000

Entry :-

6% Prefrence share capital a/c Dr. 1,00,000

To 15% Preference share capital a/c 40,000

To Reconstruction a/c 60,000

NOTE:- TALLY YOUR ANSWER

RETURN WILL BE SAME i.e.

PREVIOUS RETURN = 6,000 (6% ON 1,00,000)

NEW RETURN = 6,000 (15% ON 40,000 )

2 Like

mounika (semi qualified chartered accountant) (981 Points)
Replied 25 July 2011

former we r getting a return of 6rs for every 100 invested. in d scheme reconstruction it was agreed that d rate of interst is 15%. total interst before reconstruction is 6000. after reconstruction also interst ll same.that means noe also we ll earn same interst.

15---100

6000--?

so num.of shares r 40000

and d entry is 6%preference share cap a/c dr-600000

to 15%new prefernce share cap a/c 4000000

to reconstruction a/c 200000

1 Like

nimish solanki (IPCC CLEARED) (108 Points)
Replied 25 July 2011

hi mounika .. only rs. 60000 will go to reconstruction a/c

hw can u debit old cap as 600000 when the capital iyself is 100000

kamal's entry is correct

mounika (semi qualified chartered accountant) (981 Points)
Replied 25 July 2011

ya. i mso sry frnds. i just ans another question and printed it here. i m extremely so sorry. correct entry is

old 6% preference share cap a/c dr-100000

to new 15% p. share cap a/c -40000

to recontruction a/c -60000

plz excuse me

kamal kishor sen (STUDENT Rajasthan) (2156 Points)
Replied 26 July 2011

Originally posted by : mounika
	ya. i mso sry frnds. i just ans another question and printed it here. i m extremely so sorry. correct entry is old 6% preference share cap a/c dr-100000 to new 15% p. share cap a/c -40000 to recontruction a/c -60000 plz excuse me

Excused hahhahah

dont worry mounika sabke sath hota h , keep answering.

peehu (ipcc student) (147 Points)
Replied 07 August 2011

Originally posted by : kamal kishor sen
	6% preference share of100 each = 1,00,000 Number of shares = 1,000 Return ( 6% on 1,00,000) = 6,000 The pref shares are converted from 6% to 15% but revalued in a manner in which the total return on them remains unaffected. i.e. 6,000/15% = 40,000 Number of prefernce shares = 400 (40,000/100) i.e. 15% preference share capital @ 100 each = 40,000 Entry :- 6% Prefrence share capital a/c Dr. 1,00,000 To 15% Preference share capital a/c 40,000 To Reconstruction a/c 60,000 NOTE:- TALLY YOUR ANSWER RETURN WILL BE SAME i.e. PREVIOUS RETURN = 6,000 (6% ON 1,00,000) NEW RETURN = 6,000 (15% ON 40,000 )	this is the right answer