Answer Happy

The Stefan Co. Ltd. Is in the hands of a receiver for debenture holders who holds a charge on all assets, except uncalled capital. The following statement shows the position as regards creditors as on June 30, 1998: Liabilities $. Assets $ Cash in hand of receiver 27,00,000 Property, machinery and Share capital $. 36,00,000 in shares of $. 60 each, $. 30 paid up 30,00,000 plant etc, at cost $. 39,00,000, estimated at 15,00,000 First debentures 60,00,000 Charged under debentures 42,00,000 Second debentures Unsecured creditors 45,00,000 Uncalled capital, 60,000 Shares at $. 30 each. 18,00,000 Deficiency 75,00,000 1,35,00,000 1,35,00,000 A holds the first debentures for $. 30,00,000 and the second debentures for $. 30,00,000. He is also an unsecured creditor for $. 9,00,000. B holds second debentures for $. 30,00,000 and is an unsecured creditor for $. 6,00,000. The following scheme of reconstruction is proposed: 1. A is to cancel $. 21,00,000 of the total debt owed to him, to advance $. 3,00,000 in cash and to take first debenture (in cancellation of those already issued to him) for $. 51,00,000 in satisfaction of all his claims. 2. B is to accept $. 9,00,000 in cash in satisfaction of all claims by him. 3. Unsecured creditors (other than A and B) are to accept four shares of $. 7.50 each, fully paid, in satisfaction of 75 dollar in the rupee of every $. 60 of their claims. The balance of 25 dollar in the dollar is to be postponed, and to be payable at the end of three years from the date of the Court's approval of the scheme. The nominal share capital is to be increased accordingly. 4. Uncalled capital is to be called up in full and $. 52.50 per share cancelled, thus making the shares worth $. 7.50 each. Assuming that the scheme is duly approved by all parties interested and by the Court, adjust the statement accordingly and show the alterations in the company's Balance Sheet and give the necessary journal entries.