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SOLUTION: Journal of Enterprise Ltd.

(Rs. in crores)
Dr. Cr.
(1) Loan Funds Dr. 300

Current Liabilities Dr. 400
Provision for Depreciation Dr. 400
To Property, Plant and Equipment 500

To Current Assets 500
To Capital Reserve - profit on sale of division 100
(Being division Mobiles along with its assets and liabilities
sold to Turnaround Ltd. for Rs. 25 crores)
Notes:

Any other alternative set of entries, with the same net effect on various accounts, may be given by the
students.
In the given scenario, this demerger will meet the definition of common control transaction. Accordingly, the
transfer of assets and liabilities will be derecognized and recognized as per book value and the resultant loss
or gain will be recorded as capital reserve in the books of demerged entity (Enterprise Ltd).

Enterprise Ltd.
Balance Sheet after reconstruction (Rs. R in crores)
ASSETS Note No. Amount
Non-current assets
Property, Plant and Equipment 25
Current assets
Other current assets 200

225
EQUITY AND LIABILITIES
Equity
Equity share capital (of face value of Rs. 10 each) 25
Other equity (Surplus) 175
Liabilities

Current liabilities
Current liabilities 25
225

Notes to Accounts
(Rs. in crores)

1. Other Equity
Surplus (175-100) 75
Add: Capital Reserve on reconstruction 100
175
Notes to Accounts: Consequent on transfer of Division Mobiles to newly incorporated company Turnaround
Ltd., the members of the company have been allotted 1 crore equity shares of Rs. 10 each at a premium of Rs.

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