774 Q. 22. The business of Prospect Ltd. was being carried on continuously at losses. The following are the extracts from the Balance Sheet of the Company as on 31st March, 2010. Balance Sheet as on 31st March, 2010 Liabilities Amount Assets Amount Rs. Rs. Authorised, issed and Goodwill 50,000 Subscribed Capital: Plant 3,00,000 30,000 Equity Shares of Rs. 10 Loose Tools 10,000 each fully paid 3,00,000 Debtors 2,50,000 2,000 8% Cumulative Pref. Stock 1,50,000 Shares of Rs. 1 00 each fully paid 2,00,000 Cash 10,000 Share Premium 90,000 Bank 35,000 Unsecured Loan(From Director) 50,000 Preliminary Expenses 5,000 Sundry creditors 3,00,000 Profit and Loss Account 2,00,000 Outstanding Expenses 70,000 (including Directors' remuneration 20,000) 10,10,000 10,10,000 Note : Dividends on Cumulative Preference Shares are in arrears for 3 years. The following scheme of reconstruction has been agreed upon and duly approved by the Court. 1. Equity shares to be converted into 1,50,000 shares of Rs. 2 each. 2. Equity shareholders to surrender to the Company 90 per cent of their holding. 3. Preference shareholders agree to forego their right to arrears to dividends inconsideration of which 8 percent Preference Shares are to be converted into 9 per cent Preference Shares. 4. Sundry creditors agree to reduce their claim by one fifth in consideration of their getting shares of Rs. 35,000 out of the surrendered equity shares. 5. Directors agree to forego the amounts due on account of unsecured loan and Director's remuneration. 6. Surrendered shares not otherwise utilised to be cancelled. 7. Assets to be reduced as under: Goodwill by Rs. 50,000 Plant to Rs. 2,60,000 Tools by Rs. 8,000 Sundry Debtors by Rs. 15,000 Stock by Rs. 20,000 8. Any surplus after meeting the losses should be utilised in writing down the value of the plant further. 9. Expenses of recons uctio amounted to 10,000 10. Further 50,000 Equity shares were issued to the existing members for increasing the working capital. The issue was fully subscribed and paid-up. A member holding 100 equity shares opposed the scheme and his shares were taken over by the Director on payment of Rs. 1,000 as fixed by the Court. You are required to pass the journal entries for giving effect to the above arrangement and also to draw up the resultant Balance Sheet of the Company