The world's economic situation has been affected by the Corons virus pandemic recently. Many companies have...

 

Transcribed Image Text:

The world's economic situation has been affected by the Corons virus pandemic recently. Many companies have been suffering losses. One of them is a public company, Asazanaka Bhd. The following balances were extracted from the books of Asazeneka Bhd on 50 June 2021. RM Land and buildings Plant and machinery Research and development Brand Investments Inventories Account receivables Accumulated losses Ordinary Shares 5% cumulative Preference Shares 696 debentures Interest payable on Debentures Tax payable Account payables Bank overdraft 612,000 51,000 120,000 100,000 141,000 316,500 212,100 119,500 1,672,100 600,000 240,000 390,000 43,200 38,000 250,000 110,900 1,672,100 Notes: L The issued share capital is made up of 600,000 Ordinary Shares, each fully paid, and 240,000 5% cumulative Preference shares of each fully paid up. II. The cumulative preference dividends are two years in arrears III. There is a contingent liability of RM40,000. Additional Information The Board of Directors had devised the internal reconstruction scheme which was duly passed during the meeting with shareholders. The approval of the court was also obtained. 1. b. C. 2. 8. 3. The taxation obligations are to be paid immediately in full. 5. The company pay RM120,000 as a settlement for 50% of the trade payables immediately. The remainder agreed to be paid later, after 12 months. 5. The contingent liability materialized and the insurance company indemnified the company to the amount of RM20,000. The company settled the balance in full. 7. The accumulated losses, intangible assets, bad debts of RM20,000 and inventaries of RM34,500 are to be written off. The remaining assets are to be restated at the following fair values: RM The ordinary shareholders are to accept a reduction of paid up value from RM100 to RM0.25. The shares are then converted into ordinary shares of M1.00 each. The cumulative Preference Shareholders agreed to waive 40% of the dividend in arrears and to receive Ordinary Shares for the settlement of dividend. The debenture holders agree to the following: i. The debenture holders will receive Ordinary Shares in lieu of the total interest payable on debentures. ii. The debenture holders agree to have their loans converted into 350,000 Ordinary shares of RM100 each. Land buildings Plant and machinery Investments Required: Prepare the necessary journal entries, giving effect the proposed scheme of reorganisation. (Narrations to the journal entries are not required). (17 marks) Prepare the capital reduction account to reflect the scheme. (5 marks) Prepare the Statement of Financial Position, giving effect to the proposed scheme of reorganisation. (13 marks) 570,000 42,000 88,800 The world's economic situation has been affected by the Corons virus pandemic recently. Many companies have been suffering losses. One of them is a public company, Asazanaka Bhd. The following balances were extracted from the books of Asazeneka Bhd on 50 June 2021. RM Land and buildings Plant and machinery Research and development Brand Investments Inventories Account receivables Accumulated losses Ordinary Shares 5% cumulative Preference Shares 696 debentures Interest payable on Debentures Tax payable Account payables Bank overdraft 612,000 51,000 120,000 100,000 141,000 316,500 212,100 119,500 1,672,100 600,000 240,000 390,000 43,200 38,000 250,000 110,900 1,672,100 Notes: L The issued share capital is made up of 600,000 Ordinary Shares, each fully paid, and 240,000 5% cumulative Preference shares of each fully paid up. II. The cumulative preference dividends are two years in arrears III. There is a contingent liability of RM40,000. Additional Information The Board of Directors had devised the internal reconstruction scheme which was duly passed during the meeting with shareholders. The approval of the court was also obtained. 1. b. C. 2. 8. 3. The taxation obligations are to be paid immediately in full. 5. The company pay RM120,000 as a settlement for 50% of the trade payables immediately. The remainder agreed to be paid later, after 12 months. 5. The contingent liability materialized and the insurance company indemnified the company to the amount of RM20,000. The company settled the balance in full. 7. The accumulated losses, intangible assets, bad debts of RM20,000 and inventaries of RM34,500 are to be written off. The remaining assets are to be restated at the following fair values: RM The ordinary shareholders are to accept a reduction of paid up value from RM100 to RM0.25. The shares are then converted into ordinary shares of M1.00 each. The cumulative Preference Shareholders agreed to waive 40% of the dividend in arrears and to receive Ordinary Shares for the settlement of dividend. The debenture holders agree to the following: i. The debenture holders will receive Ordinary Shares in lieu of the total interest payable on debentures. ii. The debenture holders agree to have their loans converted into 350,000 Ordinary shares of RM100 each. Land buildings Plant and machinery Investments Required: Prepare the necessary journal entries, giving effect the proposed scheme of reorganisation. (Narrations to the journal entries are not required). (17 marks) Prepare the capital reduction account to reflect the scheme. (5 marks) Prepare the Statement of Financial Position, giving effect to the proposed scheme of reorganisation. (13 marks) 570,000 42,000 88,800

Answer rating: 100% (QA)

Answer Here are the necessary journal entries capital reduction account and the revised statement of ... View the full answer