Need help in internal reconstruction

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CA-Final
1485 Points Joined May 2012

 

What should be Accounting Entry if High Court has ordered to reconstruct Balance Sheet of a Company?
 
 
 
R Ltd. holds 21.600 Shares in Q Ltd. . This represents 15% of the share capital of that company . Q Ltd. is not a quoted company . The average net profit (after tax) of the company is Rs.2,50,000 . The shares would be valued based on 12% Capitalization rate .
 
 
 
[Note : In Balance Sheet of R Ltd. ->> Assets Side : Investment in Share in Q Ltd. at cost Rs.3,24,000]
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On 15 August 2012 at 22:03 Report
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181 Points Joined August 2012
this is from JkShah text book right
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On 15 August 2012 at 22:09
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CA-Final
1485 Points Joined May 2012
No From CA. Praveen Sharma's Book.
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On 15 August 2012 at 22:24
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181 Points Joined August 2012

calculation of market value of investment

Net profit after Tax 250000

capitalisation of net profit 250000*100/12 (ie.12%) =2083333 *15%=312500

 

and ultimatly in the balance sheet  the investment value i have written is 312500

 

this is the working i have ...do not depend understand or confirm from somewhere

because i do not understand the working note (capitalization part.)

 

I am sorry ...if this is not very helpful .

 

and in the journal entries section

the entry is

Capital reduction a/c   Dr11500 ---> (324000-312500)

     To Investments A/c            11500

the value of the investment has become less,therefore it is a loss and Cap Red A/c is Debited and investment account is creadited

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On 15 August 2012 at 22:34


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