Building at cost Machinery at cost Tnvestments Stock Debtors Cash Patents and trade marks Profit and loss account balance The authorized share capital of the company is 2,500,000 equity shares of Sb.10 each and 500,000 10% preference shares of Sh.10 each. It x decided during a meeting of the shareholders and directors of the company to carry out'a scheme of internal reconsteuction, with ‘effect from 1 April 2004, as follows: ~ 4. Each equity share is to be redesignated as a share of Sh.2.50, The equity shareholders are to accept a reduction in the nominal value of their shares from Sh.10 to $h.2.50. In addition, the sharcholders are to subscribe for a new issue on the basis of one share for ‘every two held at a price of Sh.4 per share. The existing preference shares are to be exchanged for a new issue of 3000,000 15% preference shares of Sh.10 each and 400,000 equity shates of Sh.2.50 each The debenture holders are to accept 100,000 equity shares of $h.2.50 each in lieu of interest payable. The 12% debentures are to be converted to 14% debentures. A further Sh.1,000,000 of 14% debentures of Sh.100 each are to be issued and taken up by the existing debenture holders at Sh.90 each. FINANCIAL ACCOUNTING IVDebtors 1,800,000 5 Stock 3,200,000 Machinery 1,000,000. a Buildings 2,500,000 ; Land 3,200,000 10. It is estimated that under the new arrangement, the net profit before imterest and tax will be Sh.2,500,000 per year. There will be no tax liability relating to the company for the next five years. Required: (@ Journal entries to effect the scheme of internal reconstruction. (10 marks) (®) Balance sheet of the company as at 1 April 2004 (immediately after reconstruction). (8 mazks) (QA statement showing how the anticipated profits under the new arrangement will be distributed to the various providers of capital (2 marks) (Total: 20 marks)