Capital Structure With Hati Lurus Bhd

Hati Lurus Bhd had been approved by all parties to implement the capital reduction reserve scheme.  Below is the financial situation of the company as at 31.12.2010.

Hati Lurus Bhd Statement of Financial Position as at 31 December 2010 Non-current asset
Land and building		200,000
Fixtures		50,000
Investments		70,000
Goodwill		80,000
Current Asset
Inventory		200,000
		600,000
Authorized capital
800,000 ordinary share of RM1 each	800,000
200,000 5% preference share of RM 1 each	200,000_	1,000,000
Issued Share Capital
600,000 ordinary shares of RM1 each		600,000
100,000 5% preference shares of RM1 each		100,000
Share premium		50,000
Profit and loss account		-400,000
8% debenture		100,000
Current liabilities
Loan from directors		100,000
Bank overdraft		50,000_
		600,000

                                                                                                                                        
Additional Information:

1. Ordinary share has to be reduced to RM0.50 each and preference shares has to be reduced to RM0.75 each.
2. Preference shareholder will receive one ordinary shares of RM0.50 for RM1.00 accrued dividend ( preference dividend accrued for 1 year)
3. Asset to be revalued as follows :

                      Land and building             RM300,000

  Fixtures                               RM30,000

  Inventory                            RM90,000

4. Share premium account, profit and loss account and intangible assets have to be written off
5. The contingent liability amounting RM18,500 has been paid by company. However, companies can claim back from the insurance company of RM15,000
6. Investment is sold for RM100,000
7. The director have agreed to convert their loan to RM0.50 per share of ordinary share for every RM1.00 loan given and agreed to subscribe 80,000 units of ordinary shares at RM0.50 per share
8. A special resolution has passed to convert the authorized capital to RM2,000,000 consist of 300,000 unit preference share at RM0.75 and 1,550,000 unit ordinary share of RM0.50

Changes in Company Capital Structure & Restructuring with Zinirah

Zinirah Sdn. Bhd. who encountered a problem in their business decides to implement the capital restructuring plan. Given below is the balance sheet of Zinirah Sdn. Bhd. as at 31 December 2005.

	Debit (RM)	Credit (RM)
Authorized, Issued and fully paid up capital:
10% Preference Share @ RM 1.00		150,000
Ordinary Share @ RM 1.00		1,500,000
Share premium		300,000
Profit and Loss Account	1,200,000
10% Debenture		225,000
Goodwill	180,000
Establishment expenses	7,500
Research & Development	45,000
Plant & Machinery (Net book value)	420,000
Fixtures & Fittings (Net book value)	210,000
Stock	180,000
Debtor	112,500
Cash	1,500
Bank overdraft		31,500
Creditor		150,000
	2,356,500	2,356,500

Note: Preference Share dividends are outstanding for 3 years.

A capital reduction scheme was approved by the court as follows:

1)      Preference share to be reduced by RM 0.30 per share and ordinary share by RM 0.80 per share. The Preference shareholders agreed to accept one ordinary share for every RM 1.00 accrued dividend for the purpose of full settlement of the dividend.

2)      The goodwill, establishment expenses, research & development, profit & loss account, RM 3,000 of debtors and RM 30,000 of stock are to be written off.

3)      The share premium is to be utilized for this scheme.

4)      Debenture holders agreed to accept RM 150,000 12% debenture and 375,000 units of ordinary share to replace 225,000 10% debenture.

5)      The reconstructing cost is RM 3,000.

6)      The balance in the capital reduction account will be used as the revaluation amount for plant & machinery.

You are required to prepare:

a)      Journal entries to record the above mentioned information.

b)      Capital Reduction Account.

c)       Statement of Financial Position after the completion of the capital reduction scheme as at 31 December 2005.

 

Changes In Company Capital Structure & Restructuring with Sejagat Bhd

How do you feel when trying to answer Atan Holding...?  You should feel more confident and want to try answer more question...right?... so why not you try this... and try to look out where is your loop to improve on...

 

Q4 Syarikat Sejagat

Syarikat Sejagat Ltd has been operating for 10 years of financial difficulties and had suffered business losses a few years in a row. This caused the company cannot declare or pay any dividends for four consecutive years.

In the 2005 general meeting of shareholder have agreed to implement the capital restructuring plan. The following is the balance sheet of Syarikat Sejagat ltd as at 31.12.2005

Syarikat Sejagat Ltd Financial Position As At 31 December 2005
				RM
NON- CURRENT ASSET
Land & Building				175,000
Plant &Machiney				114,000
Vehicle				95,400
Furniture				46,000
R & D Expenses				24,000
Paten				38,000
CURRENT ASSETS:
Bank				(32,000)
Debtors				75,000
Inventories				136,600
				672,000
AUTHORIZED CAPITAL:
600000 Ordinary Shared@ RM1.20				720,000
200000 4% Preference Shared @ RM1.00				200,000
				920,000
ISSUED CAPITAL:
450 000 Ordinary Shared  @ RM 1.20				540,000
100 000 4% Preference Shared @ RM 1.00				100,000
Retained Profit				(185,000)
Shared Premium				42,000
Director Loan				60,000
Creditor				115,000
				672,000

 

The company  passed  a special resolution to reduce its capital and approval of the court was duly obtained. The following is the scheme of reduction of capital:

           i            Preference shared to be reduced at RM0. 25 per unit and ordinary shared are to be reduced by RM 0.70 per unit. Both classes of shared are then combined and converted into ordinary shared of RM1.00 each.

     ii            Share premium account and profit and loss account shall be fully eliminated.

        iii            Bank overdrafts will be paid by issued of 5% debentures.

       iv            Creditor amounting to RM80 000 agreed to settle the debts by issuing ordinary share @RM1.00 for every 4 unit ordinary shared held for every RM5.00 due. The balance is paid in cash.

         v            Directors agreed to eliminate the debt on the company by received 4 unit of ordinary shared @RM 1.00 for every RM5.00 owed.

       vi            Intangible assets are eliminated in full

      vii            Assets were revalue are eliminated inn full

                       Land & building              RM 205,000

                       Plant & machinery             RM 75,000

                       Vehicle                               RM 50,000

                       Furniture                             RM 26,000

viii            Stock revalue to the value of RM112,000 and bad debts increased to 10%.

       ix            Preference shareholder, agree to receive two units of ordinary share of RM1.00 each for every RM5.00 of the outstanding dividends.

     x  To improve cash flow, all the owners agree to subscribe ordinary shares of RM1.00 each by the ratio of 2 units for every 5 units of shares held after the scheme above and fully paid.

         xi            The cost to fiancé this scheme amounting to RM 12,000

       xii            The company has received approval to increase authorized capital of  800 000 ordinary shares unit  @RM 1.00

Required:

a)      Journal entry for the transaction  above                                        (10 marks)

 

This is suggestion answer from some of your friends... you may get a view...
 

Ordinary shares (450,000 x 70 cent)	315,000
Preference shares(100,000 x 25cent)	25,000
Capital reduction		340,000
Ordinary shares (450,000 x 50cent)	225,000
Preference shares(100,000x 75 cent)	75,000
Ordinary shares		300,000
Share Premium	42,000
Capital reduction		42,000
Capital reduction	185,000
Profit & Loss		185,000
Bank overdraft	32,000
Debentures		32,000
Creditors	80,000
Ordinary shares		64,000
Bank		16,000
Directors Loan	60,000
Ordinary shares		48,000
Capital reduction		12,000
Capital reduction	62,000
RND Expenses		24,000
Paten		38,000
Land & Building	30,000
Capital reduction		30,000
Capital reduction	136,500
Plant & Machinery		39,000
Vehicle		45,400
Furniture		20,000
Stocks		24,600
Debtors		7,500
Capital reduction( 4%x100k)/RM5x2 os x 4yrs	6,400
Ordinary shares		6,400
Bank	167,360
Ordinary shares (328.4k/5)*2		167,360
Capital reduction	12,000
Bank		12,000

b)      Capital reduction account                                                               (5 marks)

 

  ... so, may be you may develop the CRA here from the journal discussed above...

               key answer:                       Dr       CRR     RM22,100

 

c)       SOFP on 31^st December 2008 after the capital reduction plans had completed                                                                                                                                    (10 marks)

... will you proceed this?

Key for:
Ordinary share = 300k+64k+48k+6.4k+167.36k
Total Asset & Liability =  674.86k