The following is the Balance Sheet of Joloss plc at 30 April 2002.

Over the past few years Joloss plc has traded at a loss and no dividends have been paid to the shareholders during that time. 

The directors are of the opinion that Goodwill is now valueless. The tangible fixed assets are overvalued by $150 000. Some stock which cost $10 000 now has no value. Included in debtors is an amount of $16 000 from a customer who has now become insolvent.

The directors are confident that, as a result of improved efficiency and the introduction of new products, the company can look forward to annual net profits of $50 000. They have proposed to the shareholders a scheme of capital reduction whereby each shareholder will receive one ordinary share with a nominal value of $0.55 for every $1 share presently held. This will enable the debit balance on the Profit and Loss Account to be eliminated and adjustments to be made to the company's assets to take account of the matters mentioned above. 

The directors' policy in future will be to pay dividends which will be covered twice by earnings. 

The shareholders have agreed to the directors' proposals and the capital reduction was effected on 1 May 2002.

Required 

(i) Prepare the Balance Sheet as it will appear immediately after the capital reduction. 

(ii) Explain the reasons why the shareholders agreed to the reduction in the nominal value of their shares.

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Intangible fixed asset - Goodwill Tangible fixed assets Current assets Stock Debtors Bank 1 tea12 mandler bevestort 32 80 6 118 Creditors: amounts falling due within one year $000 Share capital and reserves Ordinary shares of $1 Profit and Loss Account 42 $000 50 650 700 76 776 1000 (224) 776