Answer Happy

Steffan Ltd., which had experienced trading difficulties, decided to reorganise its finance. On March 31, 1998, the Trial Balance extracted from the books of the company showed the following position: Trial Balance Dr. $. $. Share capital. Authorised and Issued: 1,50,000 1,500. 6% cumulative preference shares of $. 100 each 2,00,000 2,000 Equity shares of $. 100 each 36,000 Capital Reserve 1.10,375 Profit and Loss A/c Goodwill at cost 50,000 Trade creditors 42,500 Debtors 30,200 Bank overdraft 51,000 leasehold property, provision for depreciation 30,000 leasehold property at cost 80,000 plant and Machinery at cost 2,10,000 plant and Machinery, provision for depreciation 57,500 Stock in Trade 79,175 preliminary expenses 7,250 5,67,000 5,67,000 The approval of the Court was obtained for the following scheme for reduction of Capital: (a) The preference shares to be reduced to $. 75 per share. (b) The Equity Shares to be reduced to $. 12.50. (c) One $. 12.50 equity share to be issued for each $. 100 of gross preference dividend arrears; the preference share dividend had not been paid for three years. (d) The balance in Capital Reserve Account to be utilised. (e) Plant and mach ery to be written down to $. 75,000. (f) The Profit and Loss Account balance and all intangible assets to be written off. At the same time as a resolution to reduce capital was passed, another resolution was approved restoring the total authorised capital to $. 3,50,000 consisting of 1,500, 6% cumulative preference shares of $. 75 each and the balance in equity shares were issued at par, for cash, payable in full upon application. The same were fully subscribed and paid. You are required: (1) To show the Journal entries necessary to record the above transactions in the Company's books. (2) To prepare the Balance Sheet of the Company, after completion of the scheme.