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Buy Back of Shares

The document provides summarized balance sheets for M/s Complicated Ltd. and M/s Competent Limited, detailing their liabilities and assets as of specific dates. Both companies intend to buy back 25,000 equity shares at ₹ 20 each, with the buyback authorized by their articles and necessary resolutions passed. The document requests an analysis of whether the buyback complies with the Companies Act, 2013, along with journal entries and updated balance sheets post-buyback.

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129 views2 pages

Buy Back of Shares

The document provides summarized balance sheets for M/s Complicated Ltd. and M/s Competent Limited, detailing their liabilities and assets as of specific dates. Both companies intend to buy back 25,000 equity shares at ₹ 20 each, with the buyback authorized by their articles and necessary resolutions passed. The document requests an analysis of whether the buyback complies with the Companies Act, 2013, along with journal entries and updated balance sheets post-buyback.

Uploaded by

aayushig1915
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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BUYBACK OF SHARES

1] Followings the summarized Balance Sheet of M/s Complicated Ltd. as on 31st March
2016:

Liabilities Amount (₹)

Equity shares of ₹ 10 each fully paid up 12,50,000

Bonus shares 1,00,000

Share option outstanding Account 4,00,000

Revenue Reserve 15,00,000

Securities Premium 2,50,000

Profit & Loss Account 1,25,000

Capital Reserve 1,00,000

Revaluation Reserve 1,00,000

Unpaid dividends 1,00,000

12% Debentures (Secured) 18,75,000

Advance from related parties (Unsecured) 10,00,000

Current maturities of long-term borrowings 16,50,000

Application money received for allotment due for refund 2,00,000

86,50,000

Assets Amount (₹)

Property Plant and Equipment 46,50,000


Current Assets 40,00,000

86,50,000

The Company wants to buy back 25000 equity shares of ₹ 10 each, on 1st April 2016 at ₹ 20
per share. Buyback of shares is duly authorised by its Articles and necessary resolution has
been passed by the Company towards this. The payment for buyback of shares will be made
by the Corn pany out of sufficient bank balance available shown as part of Current Assets.
Comment with your calculations, whether buyback of shares by the Company is within the
provisions of the Companies Act, 2013. It yes, pass necessary journal entries towards buy back
of shares and prepare the Balance Sheet after buyback of shares.
2] Following is the Balance Sheet of MIs Competent Limited as on 31st March, 2012:

Liabilities ₹ Assets ₹

Equity Shares of ₹ 10 each fully


12,50,000 PPE 46,50,000
paid

Revenue Reserve 15,00,000 Current Assets 30,00,000

Securities Premium 2,50,000

Profit & Loss Account 1,25,000

Secured Loans:
18,75,000
12% Debentures

Unsecured Loans 10,00,000

Current Liabilities 16,50,000

Total 76,50,000 Total 76,50,000

The company wants to buy back 25,000 equIty shares of ₹ 10 each, on 1st April, 2012, at ₹ 20
per share. Buy back of shares is duly authorized by its articles and necessary resolution passed
by the company towards this.
The payment for buy back of shares will be made by the company out of sufficient bank balance
available as a part of Current Assets. Comment with your calculations, whether buy back of
shares by company is with in the provisions of the Companies Act, 2013. If yes, pass necessary
journal entries towards buy back of shares and prepare Balance Sheet after buy back of shares.

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