XOX Technology Bhd. has proposed to undertake a capital reduction exercise by cancelling a portion of...

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XOX Technology Bhd. has proposed to undertake a capital reduction exercise by cancelling a portion of its issued share capital due to the accumulated losses of RM378,000 with the arrears on preference dividends of RM120,000. Given below is the financial data for XOX Technology Bhd. at 31 December 2022: RM137,700 Trade Payables Trade Receivables Inventories 129,600 Bank Overdraft Prepaid Expenses 72,900 10% Debentures Land and Building 742,500 Plant and Machinery 459,000 Motor Vehicles 337,500 Goodwill 159,300 Director's Loan General Reserves Ordinary Shares at RM1.60 8% Preference Shares at RM1 RM229,500 135,000 135,000 132,300 164,700 1,080,000 540,000 Below is the capital reduction scheme approval by court to overcome the financial difficulties faced by the company. 1. The ordinary shares reduce to RM0.60 each from its existing shares price. All ordinary shareholders agree to subscribe a new issue shares on the basis of 2 for 1 at the new price. 2. Exchanged 8% preference shares with a new issue of 300,000 11% cumulative preference shares of RM1 each and the balance by issuance of ordinary shares of RM0.60 each. 3. Preference shareholders received TWO (2) ordinary shares of RM0.60 each for every RM1 preference dividends in arrears. 4. Utilized general reserves for the scheme. 5. Write off all the accumulated losses and 70% of intangible assets. 6. Write off 40% of director's loan. Balance settled by issue ordinary shares of RM0.60 each. 7. Write off one third of inventories and 25% of trade receivables as a bad debt. 8. The fair value of land and building and plant and machinery were RM880,000 and RM390,000 respectively. 9. Reconstruction cost of RM80,000. 10. To record any surplus or deficiency on capital reduction account. Required (a) Prepare journal entries for the scheme above including any surplus or deficiency on capital reduction. (14 marks) (6 marks) (b) Prepare ledger or T-account for capital reduction account. (c) Indicates any FIVE (5) activities or scheme of internal reconstruction that may be involves in the process of reconstruction after the company passes special resolution and the approval of the court. (5 marks) XOX Technology Bhd. has proposed to undertake a capital reduction exercise by cancelling a portion of its issued share capital due to the accumulated losses of RM378,000 with the arrears on preference dividends of RM120,000. Given below is the financial data for XOX Technology Bhd. at 31 December 2022: RM137,700 Trade Payables Trade Receivables Inventories 129,600 Bank Overdraft Prepaid Expenses 72,900 10% Debentures Land and Building 742,500 Plant and Machinery 459,000 Motor Vehicles 337,500 Goodwill 159,300 Director's Loan General Reserves Ordinary Shares at RM1.60 8% Preference Shares at RM1 RM229,500 135,000 135,000 132,300 164,700 1,080,000 540,000 Below is the capital reduction scheme approval by court to overcome the financial difficulties faced by the company. 1. The ordinary shares reduce to RM0.60 each from its existing shares price. All ordinary shareholders agree to subscribe a new issue shares on the basis of 2 for 1 at the new price. 2. Exchanged 8% preference shares with a new issue of 300,000 11% cumulative preference shares of RM1 each and the balance by issuance of ordinary shares of RM0.60 each. 3. Preference shareholders received TWO (2) ordinary shares of RM0.60 each for every RM1 preference dividends in arrears. 4. Utilized general reserves for the scheme. 5. Write off all the accumulated losses and 70% of intangible assets. 6. Write off 40% of director's loan. Balance settled by issue ordinary shares of RM0.60 each. 7. Write off one third of inventories and 25% of trade receivables as a bad debt. 8. The fair value of land and building and plant and machinery were RM880,000 and RM390,000 respectively. 9. Reconstruction cost of RM80,000. 10. To record any surplus or deficiency on capital reduction account. Required (a) Prepare journal entries for the scheme above including any surplus or deficiency on capital reduction. (14 marks) (6 marks) (b) Prepare ledger or T-account for capital reduction account. (c) Indicates any FIVE (5) activities or scheme of internal reconstruction that may be involves in the process of reconstruction after the company passes special resolution and the approval of the court. (5 marks)

Answer rating: 100% (QA)

a Journal entries for the capital reduction scheme 1 Reduction of ordinary share capital Ordinary Share Capital 1080000 x 160 1080000 x 060 Ac Dr 1080... View the full answer