InnovateLtd.
Initial Financial Position (31 December 2023):

• Share capital, authorised and issued:

• 150,000 7% cumulative preference shares of $1 each: $150,000
• 400,000 ordinary shares of $1 each: $400,000

• Share premium account: $80,000
• Retained profits: $120,000
• Preliminary expenses: $15,000
• Goodwill (at cost): $60,000
• Trade accounts payable: $70,000
• Accounts receivable: $50,000
• Bank overdraft: $40,000
• Leased property (at cost): $100,000 (provision for depreciation: $30,000)
• Plant and machinery (at cost): $250,000 (provision for depreciation: $80,000)
• Inventory: $140,000

Total Assets: $1,515,000
Total Liabilities: $1,515,000
Approval of the Court was obtained for the following scheme for the reduction of capital:

1. The preference shares to be reduced to $0.50 per share.
2. The ordinary shares to be reduced to $0.40 per share.
3. One $0.20 ordinary share to be issued for each $1 of gross preference dividend arrears; the preference dividend had not been paid for three years.
4. The balance on the share premium account to be utilised.
5. Plant and machinery to be written down to $150,000.
6. 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.