On 31 March 2002, the following was the balance sheet of Quality Yarns Ltd:

The following scheme of capital reduction was sanctioned by the Court and agreed by the shareholders:

(a) Preference shares were to be reduced to 80p each.

(b) Ordinary shares were to be reduced to 25p each.

(c) The capital reserve was to be eliminated.

(d) The reduced shares of both classes were to be consolidated into new ordinary shares of £1 each.

(e) An issue of £300,000 5% loan notes at par was to be made to provide fresh working capital.

(f) The sum written off the issued capital of the company and the capital reserve to be used to write off the debit balance of retained profits and to reduce non-current assets by the following amounts:

(g) The bank overdraft was to be paid off out of the proceeds of the loan notes which were duly issued and paid in full.
A further resolution was passed to reduce the authorised capital of the company to 1,750,000 ordinary shares of £1 each.

Required:
Prepare journal entries (cash transactions to be journalised) to give effect to the above scheme and draw up the balance sheet of the company after completion of the scheme.

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Non-current assets Balance Sheet Goodwill and trade marks as valued Plant and machinery (at cost less depreciation) Furniture and fittings (at cost less depreciation) Current assets Inventory Sundry accounts receivable Cash Total assets Current liabilities Sundry accounts payable Bank overdraft Net assets 280,000 320,000 8,400 190,200 608,400 74,600 300 265,100 873,500 33,200 44,400 (77,600) 795,900 Equity Authorised capital 200,000 6% preference shares of 1 each 200,000 3 million ordinary shares of 50p each 1,500,000 1,700,000 Issued and fully paid capital 100,000 6% preference shares of 1 each 100,000 1,750,000 ordinary shares of 50p each 875,000 975,000 Capital reserve Less: Retained profits 60,000 (239,100) (179,100) 795,900