FutureTech Ltd. Initial Financial Position (31 December 2023): Share capital, authorised and issued: 250,000 6% cumulative preference
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FutureTech Ltd.
Initial Financial Position (31 December 2023):
- Share capital, authorised and issued:
- 250,000 6% cumulative preference shares of $1 each: $250,000
- 700,000 ordinary shares of $1 each: $700,000
- Share premium account: $150,000
- Retained profits: $220,000
- Preliminary expenses: $30,000
- Goodwill (at cost): $85,000
- Trade accounts payable: $100,000
- Accounts receivable: $90,000
- Bank overdraft: $65,000
- Leased property (at cost): $210,000 (provision for depreciation: $70,000)
- Plant and machinery (at cost): $500,000 (provision for depreciation: $150,000)
- Inventory: $250,000
Total Assets: $2,000,000
Total Liabilities: $2,000,000
Approval of the Court was obtained for the following scheme for the reduction of capital:
- The preference shares to be reduced to $0.50 per share.
- The ordinary shares to be reduced to $0.30 per share.
- One $0.20 ordinary share to be issued for each $1 of gross preference dividend arrears; the preference dividend had not been paid for four years.
- The balance on the share premium account to be utilised.
- Plant and machinery to be written down to $300,000.
- The retained profits, and all intangible assets, to be written off.
Requirement:
(a) Show the journal entries necessary to record the above transactions in the company’s books.
(b) Prepare a balance sheet of the company after completion of the scheme.
Related Book For
Frank Woods Business Accounting Volume 2
ISBN: 9781292085050
13th Edition
Authors: Frank Wood, Alan Sangster
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