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CA Intermediate · Advanced Accounting · Internal Reconstruction

Zenith Motors Ltd has 20,000 equity shares of ₹100 each fully paid. Under a reconstruction scheme, the paid-up value of each share is reduced by ₹75 and each reduced share is then sub-divided into shares of ₹5 each fully paid. What amount is credited to Capital Reduction Account, and how many new equity shares of ₹5 each result?

₹15,00,000 is credited to Capital Reduction Account and 1,00,000 new shares of ₹5 each result. The reduction is 20,000 shares times ₹75. The remaining capital of ₹5,00,000 divided by ₹5 per share gives 1,00,000 shares.

  1. A₹5,00,000; 1,00,000 shares
  2. B₹15,00,000; 1,00,000 sharesCorrect
  3. C₹15,00,000; 20,000 shares
  4. D₹15,00,000; 3,00,000 shares

Explanation

Reduction is 20,000 × ₹75 = ₹15,00,000. Remaining paid-up per share is ₹25, so total capital becomes ₹5,00,000. At ₹5 per share this gives 1,00,000 shares. Option ₹5,00,000 uses the remaining capital instead of the reduction, and 3,00,000 shares divides the reduction by ₹5.

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