Advanced AccountingQuestion 5337 of 305
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14. The Balance of Equity Share Capital after internal reconstruction is :

Options

A` 6,50,000
B` 4,50,000
C` 5,50,000
D` 7,50,000
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Correct Answer

Option C` 5,50,000

All Options:

  • A` 6,50,000
  • B` 4,50,000
  • C` 5,50,000
  • D` 7,50,000

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Detailed Solution & Explanation

To calculate the Equity Share Capital balance after reconstruction:
1. Opening Equity Share Capital = 5,00,000\displaystyle `\,5,00,000 (50,000 shares of 10\displaystyle `\,10 each).
2. Issue of 15,000 shares to debenture holders: increases capital by 15,000×10=1,50,000\displaystyle 15,000 \times 10 = `\,1,50,000.
3. Reduction of capital: shareholders give up 40% of their capital, which reduces capital by 2,00,000\displaystyle `\,2,00,000 (40% of 5,00,000\displaystyle `\,5,00,000).
4. Fresh issue of equity shares = 1,00,000\displaystyle `\,1,00,000.
5. Final Equity Share Capital is:
Final Capital=5,00,0002,00,000+1,50,000+1,00,000=5,50,000\text{Final Capital} = `\,5,00,000 - `\,2,00,000 + `\,1,50,000 + `\,1,00,000 = `\,5,50,000
Hence, **Option C** is the correct answer.

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