TOPIC 3: CHANGES IN CAPITAL STRUCTURE AND INTERNAL RECONSTRUCTION

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Let's us try this example to test your understanding from your reading...

 

Below is the balance sheet of Yeye LTD as at 31 December 2009

                                                                      RM                          RM

Assets

Land & Building                                                               280,000                    

(-) Acc. Depreciation                                                          80,000                        200,000

Plant & Machinery                                                           80,000

(-) Acc. Depreciation                                                        10,000                           70,000   

Goodwill                                                                                                                    30,000

Preliminary expenses                                                                                                 3,000

Inventories                                                                                                                 70,000

Debtors                                                                                                                       45,000

                                                                                                                                   418,000

Equity and Liabilities

500,000 ordinary shares @ RM1.00                                                                     500,000

200,000 preference shares @ RM1.00                                                                 200,000

Premium shares                                                                                                        100,000

Accumulated losses                                                                                               (450,000)

Creditors                                                                                                                     50,000

Bank overdraft                                                                                                          18,000

                                                                                                                                   418,000

Company approved a special resolution to do the restructuring of the company’s and court permission was obtained. Restructuring scheme consists of the following:

1. The ordinary shares to be reduced to 30 cent per share and preference shares will be reduced to 75 cent per share.
2. Share premium account to be utilized for the scheme
3. Assets were revalued as follows :

Land & Building           RM220,000

Plant & Machinery      RM60,000

Inventories                   RM50,000

Debtors                         RM38,000

 

4.       All intangible assets and accumulated losses are to be written off.

5.       The Board of Director has agreed to subscribed for 200,000 ordinary shares of 30 cent per share paid in cash and partly used to pay the bank overdraft.

You are required to prepare:

a)      Journal entries to record the capital reduction

b)      The capital reduction account

c)       The Statement of Financial Position of Yeye LTD immediately after the capital reduction.


...how to start this...?

...don't worry...! You may start with the journal entry as per note given...


Suggestion: 

Dr  OS         350,000 (0.70 x 500,000)
       PS           50,000 (0.25 x 200,000)
       Cr   CRA                      400,000

Dr  Share Premium          100,000
       Cr   CRA                       100,000

Dr     Land & Building        20,000
        Cr    CRA                           20,000

Dr   CRA                     37,000
        Cr     Plant & Machinery                  10,000
                 Inventories                               20,000
                 Debtors                                      7,000

Dr   CRA            33,000
        Cr     Goodwill                    30,000
                 Preliminary Expenses                    3,000

Dr    CRA          450,000
         Cr   Accumulated Losses              450,000

Dr        Bank        60,000
         Cr     OS           60,000

Dr        Bank Overdraft                18,000
          Cr          Bank                         18,000

CRA
P & M	10,000	OS	350,000
Inventory	20,000	PS	50,000
Debtors	7,000	Share Premium	100,000
Goodwill	30,000	L & B	20,000
Preliminary Expenses	3,000
Accumulated Losses	450,000
	520,000		520,000

YeYe Bhd
Statement of Financial Position as at 31.12.2009
NCA:
L & B	220,000
P & M	60,000
CA:
Inventory	50,000
Debtors	38,000
Bank	42,000
	410,000
Equity:
700,000 OS@RM0.30	210,000
200,000 PS @ RM0.75	150,000
CL:
Creditors	50,000
	410,000
**Bank = RM60,000-RM18,000 Question 1: Given below is Statement of Financial Position of Pink Star Ltd as at 31 December 2008. Non-Current Assets : Properties                         300,000 Plant and machinery                         105,000 Goodwill                            45,000 Research and Development                              4,500                         454,500 Current Assets : Stocks                         105,000 Debtors                            67,500                         172,500                         627,000 Issued and paid up capital : 750,000 ordinary shares of RM 1/ -each                         750,000 300,000 7% preference shares of RM 1/ -each                         300,000 Share premium                         150,000 Profit and loss account                       (675,000)                         525,000 Current Liabilities : Creditors                            75,000 Bank overdraft                            27,000                         102,000                         627,000 The company passed a special resolution to reduce its capital and the approval of court was duly obtained. The following is the scheme of reduction of capital: 1.       The ordinary shares and preference shares are to be reduced to 25 cents and 60 cents respectively, and the share premium is to be utilized for the scheme. 2.       The following values will be adopted for the assets: RM Properties 330,000 Plant and machinery 90,000 Stocks 75,000 Debtors 57,000 3.       All intangible assets and the profit and loss balance will be written off. 4.       The directors agreed to take up 350,000 ordinary shares of 25 cents each, payable in cash immediately and part of the proceeds will be used to pay off the bank overdraft. Your are required to prepare: a.       Journal entries to record the capital reduction. b.      The capital reduction account ; and c.       The Statement of Financial Position of Pink Star Ltd immediately after the capital reduction.   Following is the Statement of Financial Position of FAM Corporation Ltd as at 31 December 2009.                                                                                                                        RM Authorized Share Capital       300,000 8% Preferences Share @ RM1.00                                              300,000 1,100,000 Ordinary Share @ RM 1.00                                                  1,100,000                                                                                                                       1,400,000          Issued Share Capital                                                    300,000 8% Preferences Share @ RM1.00                                              300,000 600,000 Ordinary Share @ RM1.00                                                         600,000 Capital Reserves                                                                                            20,000 Profit and loss                                                                                               (400,000) Creditor                                                                                                            150,000                                                                                                                                                          670,000 Assets Land and building                                                                              200,000   Plant and Machine                                                                             200,000 Stock                                                                                                       65,000 Debtor                                                                                                   125,000 Bank                                                                                                          15,000 Goodwill                                                                                                   65,000                                                                                                                                                      670,000           A capital reduction scheme agreed to by all parties and sanctioned by the court is as follows: The ordinary share to be reduced to RM0.25 per share and the preferences shares reduced to RM0.75 per share. All the shares that have been reducing the value are to be combined to ordinary      shares at par value of RM1.00 per share. The Intangible Assets and profit and loss account are to be written off. The capital reserves to be utilized for the scheme. Assets were revalue as follows: Land and building     RM 220,000 Plant and machine     RM 230,000  Debtor                       RM    25,000 Stock                         RM    25,000 6.       The creditor agreed to receive 20,000 units of ordinary shares at par value of RM1.00 for being paid their debts amounted RM 30,000. 7.       The right issues have been accomplished at portion 1:1 on premium price of 10% and fully subscribed by all new ordinary shareholders. You are required to prepare: a)      Record the transactions in journal entries b)      Capital Reduction Account c)       Statement of Financial Position after the scheme completely imposed. Given below is the statement of Financial Position of  Mawar Ltd as at 31 December 2008. Mawar Ltd Statement of Financial Position as at 31 December 2008 Non Current Assets                                                                          RM                             RM Land & Building                                                                                                           130,000 Goodwill                                                                                                                          15,000 Vehicle                                                                                         85,000 (-) Accumulated Depreciation                                               (48,000)                       37,000 Current Assets Inventories                                                                                                                      42,000 Debtors                                                                                                                            31,000                                                                                                                                           73,000 (-) Current Liabilities Bank Overdraft                                                                    15,000 Creditors                                                                               28,000 Working Capital                                                                                                                                                                                                                                  30,000                                                                                                                                                                 212,000 Equity Ordinary Share @ RM 1.00                                                                                                           200,000 8% Preference Share @ RM 1.00                                                                                                 50,000 Accumulated Losses                                                                                                                       (38,000)                                                                                                                                                                 212,000   The company passed a special resolution to reduce its capital and the approval of the court was duly obtained. The following is the scheme of reduction of capital : a)      The Ordinary shares to be reduced at 50 cent per share and preference shares will be reduced to 80 cent per share. b)      Land & Building to be reduced at RM 20,000. c)       RM 12,000 of inventories will be disposed. d)      Accumulated depreciation for vehicle is increased to RM 8,000. e)      Goodwill and Accumulated losses will be written off. f)       Dividends for preference shares are outstanding for four years. Preference shareholders are willing to receive 16,000 units of ordinary shares of RM 0.50 each as a complete solution for the dividends in arrears. REQUIRED : Journal entry for the transaction above. Capital reduction account. Statement of Financial Position on 31st December 2008 after the capital reduction plans had completed. What is dividend arrears?  Click here... After you understand what the arrears is... let us try with this question... Atan Bhd was face difficulties in business and made a decision to restructure the company's financial.  On 31 December 2009 the trial balance was release as follow: RM RM "000 "000 250,000 Preference Share 10%@RM1.00 per share 250,000 200,000 Ordinary Share @ RM1.00 per share 200,000 Share Premium Account 55,000 Accumulated Losses 137,900 Research and development Expenses 9,250 Goodwill 18,100 Creditors 38,000 Debtors 42,100 Bank Overdraft 45,000 Freehold Lands 148,900 Machinery 280,000 Accumulated depreciation of Machinery 58,000 Stock 9,750        646,000 646,000 The courts approve to start a reduction capital plan as follow: 1.  Preference share to be reduced to RM0.85 per share. 2.  Ordinary share to be reduced at RM0.75 per share. 3.  The preference shareholders to receive one ordinary share of RM0.25 each for every RM1.00 preference dividend in arrears. 4.  The share premium account has to be right off. 5.  Machinery have to revalue for RM175,000. 6.  Accumulated losses and all intangible assets have to be right off. 7.  500,000 ordinary share was issued at par value to gain company cash and fully paid. While the resolution of reducing capital approved, another resolution to state the capital RM450,000 include 250,000 preference share 10% value RM0.85 per share and the balance will be in ordinary share value RM0.25 per share was approved. Required: 1.  Journal entry for the transaction above 2.  Capital reduction account (CRA: CRR 24,000) 3.  Statement of Financial Position on 31 December 2009 after the capital reduction plans had completed.(455,750) **Key answer no. 3: 25,000 x 0.25 Dr  Capital Reduction Account       6,250       Cr   Ordinary Share Capital (Accrual Dividend)            6,250 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 in full:                             Land& building                    RM 205,000                        Plant&machinery                 RM 75,000                        Vehicle                                RM 50,000                        Furniture                             RM 26,000   v       iii            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 scheme above and fully paid.          x            The cost to fiancé this scheme amounting to RM 12,000        xi            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 (418.4k/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)       Balance sheet on 31st 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 Q5 Syarikat Anduh Balance sheet of Syarikat AHH before reorganization shows below: Syarikat ANDUH Balance sheet as at 31 December 2008   RM Non-current assets:   Freehold land 525,000 Vehicles 750,000 Plant and machinery 1,250,000 Goodwill 50,000     Current assets:   Debtors 250,000 Inventories 125,000   2,950,000 Equity and liability:   2,500,000 ordinary shares of RM1.00(paid to 0.80 sen) 2,000,000 1,250,000 8% preference shares of RM1.00 1,250,000   3,250,000 Accumulated losses (1,250,000)   2,000,000 Loan from directors 625,000 Creditors 200,000 Bank overdraft (125,000)   2,950,000    Note: There is a contingent liability of RM250,000 1.Uncalled capital to be called up and fully paid 2.The ordinary shareholders to surrender 2 for 1 at a price of RM1.00 per share. The existing preference shares are to be exchanged to ordinary shares of RM1.00 with ratio 1 for 2 3.Creditors of RM100,000 paid with ordinary shares 100,00 units of RM1.00 each 4.Freehold land of RM250,000 (net value) was revalued at RM375,000, which will be take by the directors as loan payment. Balance in loan from director was paid by cash 5.Balance of freehold land was revalued to RM550,000 6.The remaining assets are to be restated at the following fair value:                 Vehicles                               RM375,000                 Plant and machinery       RM1,000,000 7.Goodwill and accumulated losses to be written off 8.Old inventories of RM12,500 and bad debts of RM62,500 to be written off 9.Contingent liability of RM250,000 materialized and reorganization expenses of RM25,000 paid 10.The company agreed to issue 250,000 units ordinary shares at price of RM1.20 each and fully paid You are required to prepared: a)      Journal entries to record the above mentioned information  b)  Balance sheet of Syarikat ANDUH immediately after the reorganization Q6 SunSay Ld Given below is the Statement of Financial Position of SunSay Ltd as at 31.12.2006 SunSay Ltd                                                  Statement of Financial Position as at 31 December 2006   RM RM        Non Current Asset        Property ,Plant and equipment        Land and Building        Plant and Machinery         Goodwill         Current Asset  Inventories         Debtors           Current Liabilities   Bank   Creditors          Bill Payable net Current Assets          Financed By: Authorized Capital 1,000,000 5% Preference Shares @RM 1 per Share 2,000,000 Ordinary Shares @RM 1 per Share        Issued and fully paid up Capital 600,000 5% Preference Shares @RM 1 per share 1,400,000 Ordinary Shares @RM 1 per share Less:Call in arrears (on 20,000 ordinary shares of Rm0.25 each) Accumulated Loss     400,000 360,000         126,000 110,000 236,000   (110,000) (150,000) (40,000)     760,000 100,000 860,000                   (65,000) 795,000       1,000,000 2,000,000 3,000,000     600,000 1,400,000 2,000,000     (5,000) 1,995,000        1,200,000 795,000 The call in arrears of RM0.25 per share on 200,000 has not been received. A capital reduction scheme duly approved  by the court and the shareholders of SunSay Ltd.  It is to recover the financial position of the company. The Scheme agreed to by all parties is as follows:  To forfeit and Cancel  the 20,000 shares which are not fully paid up. To reduce the ordinary shares to RM0.10 per share and then to consolidated the reduce ordinary into RM1.00 orndinary shares The preference Shareholders to accept  500,000 ordinary shares of RM1 each in exchange for the 5% Preference shares. To write off accumulated loss and goodwill. Asset were revalued as follows: Land and Building                     RM433,000 Plant and Machinery                      300,000 inventories                                    100,000 Debtors                                         106,000 The authorised capital to be restored to RM3,000,000 in ordinary shares of RM1.00 each. You are required to prepare : Journal Entries necessary to above transactions                                (15 marks ) Capital Reduction Account                                                                      (5 marks ) Statement of Financial Position after the completion of the capital reduction scheme as at 31 December 2006                             (5  marks ) Q8 Syarikat Senjana Bhd   After a few years operating with loss , syarikat Senjana Sdn Bhd decides to have approval from related party to start capital reconstruction program. The following are balance sheet of syarikat Senjana Sdn Bhd as at 30 June 2006: Authorized capital                                                                                           RM   (‘000 ) 1,000,000 6% cumulative preferences share @ RM2 each                           2,000 3,000,000 ordinary share @ RM2 each                                                             6,000   Issued Capital 600 000 6% cumulative preferences share @RM2 each                                1,200 300 000 ordinary share @ RM2 each                                                                6,000 Debenture 5%                                                                                                        1,000 Share premium                                                                                                          145 P & L account                                                                                                         (2,250)                                                                                                                                    6,095 Fixed Assets: Freehold land & building                                                                                         2,870 Plant & machinery at cost                                                                    2,450 (-) Accumulated depreciation                                                                 735         1,715 Motor vehicle at cost                                                                               544 (-) Accumulated depreciation                                                                  215            329 Investment                                                                                                                    150 Goodwill                                                                                                                         187 Patent                                                                                                                             170 R & D expenses                                                                                                             259                                                                                                                                      5,680 Current asset Trade receivable                                                                               465 Stock                                                                                                   380                                                                                                             845 (-) Current Liabilities: Bank                                                                                                    165 Trade payable                                                                                    265                                                                                                              430                      415                                                                                                                                        6,095 Additional information a)      The ordinary share to be reduced 60% per share from par value and preference share reduced 40% each from par valued. Both of share classify will be combined and converted into ordinary share with RM 1 per value. b)      3 year arrear on preferences share dividend will be settled by issuing 2 ordinary shares for every RM 5 preference share dividend arrears. c)       Assets ware revalue as follows: I)                    Plant & machinery                                       RM  165 000 II)                  Motor vehicles                                             RM  278 000 III)                Stock                                                            RM  364 000 d)      Trade creditor agree to receive RM100 000 cash and remaining balance will be settled by receive 2 ordinary share for RM 3 each. e)      The debenture holders took over a piece of land (cost RM180 000) at an agreed value of RM 245 000 in part settlement of the principal and remaining will be settled by issuing two ordinary share of RM1 each every RM5 debenture. The interest payable will fully paid by cash. The remaining freehold land was valued at RM2,772,000. f)       Investment has sold at valued RM 185 000. g)      The existing ordinary shareholders are accepting to subscribe for a new issue on the basis of one for 10 unit ordinary share held and fully paid. The authorized capital to be restored to RM5 in ordinary share of RM 1 each. h)      The accumulated losses and all intangible assets be written off. i)        Cost of reconstruction amounted to RM4 500 You are required to prepare a)      CRA b)      Ordinary share account c)       Bank account d)      The statement of Financial Position of Senjana Bhd after the capital reduction completed. Let's us try this next question then...     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. Q9 Totokawa Ltd   On March 31, 2010, the following Statement of Financial Position shows the financial position of Teshinhan Ltd:         RM RM        Non-current Assets              Plant and machinery (cost)   71,600          Fittings and fixtures   4,200          Goodwill   75,000                Current Assets              Stock   56,950          Debtors   21,750     229,500          Authorized Share Capital              50,000 Preference Share 7% @ RM1.00 50,000           700,000 Ordinary Share @ RM0.50 350,000 400,000              Issued Share Capital              50,000 Preference Share 7% @ RM1.00   50,000          400,000 Ordinary Share @ RM0.50   200,000          Profit and loss account   (61,300)          Capital reserve   16,000               Current Liabilities              Creditors   10,600          Bank overdraft   14,200     229,500 Here is the scheme of capital reduction allowed by the court and agreed by all shareholders. Preference share and ordinary shares will be reduced to RM0.75 and RM0.20 each. Both types of shares that have been reduced will be incorporated as a new ordinary shares of RM1.00 each. Capital reserve and profit and loss account is written off. The bank overdraft is fully funded through the issuance of 8% debentures issued and fully paid. Non-current assets will be reduced to :                   Plant and Machinery (cost)                 RM 56,000                   Fittings and Fixtures                             RM 2,000                   Goodwill                                              RM 5,000 The new resolution states the authorized share capital are 400,000 ordinary shares @ RM1.00 each.  You are required to provide :                                  i.            Journal Entries to record the capital reduction                                ii.            Statement of Financial Position as soon as this scheme is completed. Well done!  It's look your much more better to understand about this topic... and just try this last episode exercise in this topic and prepare for your test and quiz... 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: Ordinary share has to be reduced to RM0.50 each and preference shares has to be reduced to RM0.75 each. Preference shareholder will receive one ordinary shares of RM0.50 for RM1.00 accrued dividend ( preference dividend accrued for 1 year) Asset to be revalued as follows :                       Land and building             RM300,000   Fixtures                               RM30,000   Inventory                            RM90,000 Share premium account, profit and loss account and intangible assets have to be written off The contingent liability amounting RM18,500 has been paid by company. However, companies can claim back from the insurance company of RM15,000 Investment is sold for RM100,000 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 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