The following is the summarized balance sheet of Tabu Ltd. at 30 June 2002
|
Sh.'000'
|
Sh.'000'
|
Sh.'000'
|
|
Non-current assets:
Tangible: Freehold property
Plant
Intangible: Patents
Goodwill
Current assets:
Stock
Debtors
Investments (market value Sh.25 million)
Deferred advertising
Current liabilities:
Bank overdraft
Creditors
Debenture interest payable
Accruals
Directors loans
Financed by:
Share capital:
6% 8 million cumulative preference shares of Sh.10 each.
15 million ordinary shares of Sh.10 each.
Revenue reserves:
Profit and loss account
Shareholders account
Non-current liabilities:
6% Debentures
|
39,000
50,000
4,500
10,000
20,000
|
10,500
28,000
85,000
97,000
11,000
20,000
213,000
(123,500)
|
85,000
10,000
95,000
38,500
133,500
89,500
223,000
80,000
150,000
230,000
(82,000)
148,000
75,000
223,600
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The court approved a scheme of re-organization submitted by the debenture holders and agreed upon by other interested parties to take effect on 1 July 2002 as follows:
The preference shares to be written down to Sh.7.50 each and the ordinary shares to Sh.2.00 each; each class of shares then to be consolidated into shares of Sh.10 each. The rate of dividend on preference shares to be increased to 10%.
The preference dividends are four years in arrears of which three-quarters are to be waived and ordinary shares are to be allocated at par for the balance.
The debenture holders to have their interest paid in cash, to take over freehold property (book value Sh.20 million) at a valuation of Sh.24 million in part repayment of their holding and to provide additional cash capital of Sh.26 million secured by a floating charge on the company's assets at an interest rate of Sh.12% per annum.
Patents, goodwill and deferred advertising to be written off, Sh.15 million to be written off stock, Sh.11.7 million to be provided for bad debts and the remaining freehold properties to be revalued at Sh.77.5 million.
Investments to be realized.
The directors to accept settlement of their loans as to 90% thereof by allotment of ordinary shares at par and as to 5% in cash, the balance of 5% being waived.
The trade creditors to be paid Sh.0.10 in every shilling to maintain and obtain an extension of the credit period.
The bank has sanctioned an overdraft limit of Sh.10 million to provide working capital.
There are capital commitments amounting to Sh.75 million which are to be canceled on payment of 31/3 % of the contract price as a penalty.
The authorized capital was restored to its original amount.
Required:
(a). The capital reduction account to record the scheme of capital re-organization.
(b). The balance sheet of Tabu Limited as at 1 July 2002 immediately after affecting the scheme.