A scheme for financial reorganization has been drawn up for the consideration of shareholders and creditors.

The terms are as follows:

1. The shares of GH¢1 each are to be written down to 20Gp per share and subsequently every five shares of 20Gp each are to be consolidated into one fully paid share of GH¢1.
2. The existing shareholders are to subscribe for a rights issue of two new equity shares, issued at GH¢1, for every share held after the proposed reduction and consolidation.
3. A major supplier agrees to exchange a debt of GH¢270,000 included in payables for 270,000 equity shares of GH¢1 each fully paid.
4. In full settlement of the GH¢1,030,500 owing, the bank agrees to accept an immediate payment of GH¢130,500 and to consolidate the balance of GH¢900,000 into a loan, carrying interest of 40% per annum, repayable in five equal instalments commencing 31^st December 2020.

The loan to be secured by a fixed charge on the land and buildings and a floating charge on the company’s other assets.

5. The credit balance on the capital surplus account and the debit balance on the retained earnings account and goodwill are considered valueless and are to be written off.
6. The assets listed below are to be restated at the following amounts:

GH¢

Plant and machinery 187,500

Inventory 315,000

Receivables 750,000

Land and buildings 480,000

A group of dissatisfied shareholders plan to oppose the scheme on the grounds that they have to bear the whole burden of the reorganization whereas the bank loses nothing.

The company has received a cash offer of GH¢1,680,000 for its non-current and current assets.

Required:

(A). Make journal entries (including cash transactions) to give effect to the proposed scheme of reconstruction.