QUESTION TWO Following a series of trading losses, the cloven Hoof Bitumen co. Ltd., resolved to reduce its capital to 50,000 fully paid K0.50 SHARES AND DEBENTURES Shares and to eliminate its Share Premium Account . The Company's Balance Sheet prior to the implementation of the scheme was: K K Share Capital Good will 10,000 50,000 fully paid shares Land and buildings 16,200 Of K1 each 50,000 Plant and Machinery 20,700 Share Premium Account 5,000 Stock 9,200 Creditors 6,200 Debtors 7,400 Overdraft 7,300 Profit and loss A/C 5,000 K68,500 K68,500 It was resolved to apply the sum available under the scheme: (a) To write off the Goodwill Account, (b) To write off the debit balance on the profit and loss Account, (c) To reduce the book values of the assets by the following amount: Land and Buildings K4,200 Plant and machinery K6,700 Stock K3,360 (d) To provide a Bad Debts Reserve of 10 of the book value of debtors. Show, by journal entries, the accounting adjustments required to give effect to the scheme and prepare the revised SOFP after its implementation, (20 Marks)