Oman College of Management and Technology,
Department of Administrative and Financial Sciences:
Advanced Accounting (203304)
Chapter-1
Exercises:
1.
The balance sheet of A Ltd is presented below
Balance sheets of A Ltd
(Amount in RO)
Capital and Liabilities
Amount
Share Capital:
10,000Equity shares of RO10 each
Land and Buildings
100,000 Plant and Machinery
10,000 12% Preference shares of RO
10 each
Assets
Furniture and Fittings
Amount
60,000
65,000
35,000
100,000
5,000 10% debentures (RO 10 each)
50,000 Stock
30,000
Creditors
30,000 Sundry debtors
15,000
Profit and Loss Account
40,000
Discount on issue of shares
20,000
Preliminary expenses
15,000
280,000
280,000
Due to continuous poor performance and consequent loss, the management decided to
undertake a wide range of internal reorganization of the capital structure and the following
are the outcomes of internal reorganization:
1. The face value of equity shares is reduced from RO. 10 to RO 5 each;
2. The face value of preference shares is reduced from RO 10 each to RO 7.500 each;
3. The number of debentures is reduced from 5000 to 2500;
4. The amount raised by the reduction of shares and debentures would be used to write
off profit and loss account, discount on issue of shares and preliminary expenses. The
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balance of the amount will used to write off furniture by RO 10,000; stock by RO
10,000 and the debtors by RO 5,000
Required:
Pass journal entries in the books of the companyand prepare Reconstruction account. Also
prepare the balance sheet of the company after the reconstruction.
2.
The following are the balance sheet of Muscat Steel Company Ltd as on 1.1.2013
(Amount in RO)
Capital and Liabilities
Amount
Share Capital:
60000 Equity shares of RO10 each
Assets
Land and Buildings
Amount
300,000
600,000 Plant and Machinery
450,000
Goodwill
22,500
30000 12% Preference shares of RO
10 each
300,000
15,000 10% debentures (RO 10
150,000 Stock
65,000
each)
Creditors
Bank Overdraft
75,000 Sundry debtors
150,000 Cash
Profit and Loss Account
Preliminary expenses
1,275,000
70,000
7,500
350,000
15,000
1,275,000
On the above date, the company adopted the following scheme of reconstruction:
1. The preference shares are to be reduced to fully paid 14% preference shares of RO
7.500 per share;
2. The equity shares are to be reduced to fully paid shares of RO 4 each;
3. The debenture holders took over the stock and debtors in full settlement of their
claims;
4. The fictitious and intangible assets are to be eliminated;
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5. The land and buildings to be appreciated by 30% and machinery to be depreciated by
30%;
6. The expenses of reconstruction amounted to RO 4,500.
Required:
Give journal entries incorporating the above scheme of reconstruction and prepared
reconstructed balance sheet.
3.
The balance sheet of Oman Textile Mills Ltd as on 31-12-2012 is presented below:
Balance sheets of A Ltd
Capital and Liabilities
Amount
Share Capital:
50,000 Equity shares of RO10 each
Assets
Land and Buildings
500,000 Plant and Machinery
50,000 12% Preference shares of
RO 10 each
(Amount in RO)
Furniture and Fittings
Amount
275,000
225,000
110,000
500,000
7,000 10% debentures (RO 10 each)
70,000 Stock
75,000
Creditors
30,000 Sundry debtors
155,000
Bank Overdraft
20,000 Profit and Loss Account
160,000
Discount on issue of shares
80,000
Preliminary expenses
40,000
1,120,000
1,120,000
On the over date, the management of the company has adopted the following reorganization
of the capital structure:
1. The face value of the equity shares is reduced from RO 10 each to RO 6 each;
2. The face value of the preference shares is reduced from RO 10 each to RO 8 each;
3. 10% debentures of RO 10 each are converted in to 12% debentures of RO 6 each;
4. Creditors agreed to forgo RO 10,000 and the bank overdraft amounting RO 2000 is
waived by the bank;
5. The land and building is appreciated by RO 40,000;
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6. The management agreed to write off the following assets by the amount stated
thereon: Debtors : RO 30,000; Stock: 25,000; Furniture : 20,000; Plant and
machinery: RO 55,000 and profit and loss account, discount on issue of shares and the
preliminary expenses;
7. In order to facilitate the paying off of creditors and bank overdraft and to maintain
enough working capital, the management decided to issue 10,000 equity shares of RO
6 each as fully paid.
Required:
1. Pass the journal entries required to record the above transactions in the books of the
company;
2. Prepare the balance sheet incorporating the above changes
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