CA Intermediate · Advanced Accounting · Internal Reconstruction
Under a scheme of internal reconstruction of Meghdoot Ltd, the holders of ₹10,00,000 debentures, along with ₹1,20,000 of accrued debenture interest, agree to accept equity shares of ₹7,00,000 (issued fully paid) and ₹2,00,000 in cash in full settlement. What amount is the sacrifice credited to the Capital Reduction Account?
The sacrifice is ₹2,20,000. The total claim of debenture holders including interest is ₹11,20,000, while they receive shares of ₹7,00,000 and cash of ₹2,00,000, which is ₹9,00,000. The difference is credited to the Capital Reduction Account.
- A₹2,20,000Correct
- B₹1,00,000
- C₹4,20,000
- D₹1,20,000
Explanation
Total claim = 10,00,000 + 1,20,000 = ₹11,20,000. Settlement = 7,00,000 + 2,00,000 = ₹9,00,000. Sacrifice = ₹2,20,000. Ignoring interest gives ₹1,00,000, and ignoring the cash paid gives ₹4,20,000.
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