7.4: Richard Bhd. found itself in financial difficulty and decided to reorganise its affairs. The following is the trial balance extracted from its books as at 30 June x6. RM 000 RM1000 Debits Credits Land 150,000 Ordinary share of RM1 EACH 400,000 Building (cost) 500,000 6% cumulative prfeerence shares of RM1 each 100,000 Equipment (cost) 130,000 8% Debentures 200,000 Intangibles 30,000 Accumulated depreciation Inventories 80,000 Building 170,000 Trade receivables 65,000 Equipment 22,300 Accumulated Loss 200,000 Trade payabale 80,000 Loan from directors 100,000 Bank 82,700 1,155,000 1155000 Notes: 1. The issued shares capital is made up of 400 million ordinary shares, each fully paid up, and 100 million 6 percent cumulative preference shares. II. Preference dividends are in arrears for two years III. There is contingent liability of RM4 million The scheme agreed to by all parties and sanctioned by the court is as follows: 1. Each ordinary share is to be converted into one fully paid ordinary shares of 25 sen and the existing ordinary shareholders are to subscribe for one ordinary share for every one held at 35 sen per share payable in cash. 2. The 6 percent cumulative preference share are to be cancelled and in return the preference shareholders are to receive one 7 percent preference share of RM1 each and two 24 sen ordinary shares for every two 6 percent cumulative preference shares held. The preference shareholders agreed to waive 50 percent of the preference dividend in arrears and accept ordinary shares of 25 sen for the balance of the preference dividends in arrears. 3. The directors agreed to convert their loans to 5 percent debentures of nominal value RM100 million. 4. The accumulated losses, Intangibles, bad debts of RM5,000,000 and inventories of EM 10,000,000 are to be written off. 5. The following value to be adopted: RM'000 Land 170,000 Building 300,000 Equipment 46,000 Additional Information: 1. Cost of reconstruction amounted to RM1.3 million. II. Contingent liability materlalized and the insurance company Indemnifled the company to the amount of RM3 million. Required: a) Journal entries to record the above transaction and b) Statement of financial position of Richard Bhd. immediately after the reconstruction 7.4: Richard Bhd. found itself in financial difficulty and decided to reorganise its affairs. The following is the trial balance extracted from its books as at 30 June x6. RM 000 RM1000 Debits Credits Land 150,000 Ordinary share of RM1 EACH 400,000 Building (cost) 500,000 6% cumulative prfeerence shares of RM1 each 100,000 Equipment (cost) 130,000 8% Debentures 200,000 Intangibles 30,000 Accumulated depreciation Inventories 80,000 Building 170,000 Trade receivables 65,000 Equipment 22,300 Accumulated Loss 200,000 Trade payabale 80,000 Loan from directors 100,000 Bank 82,700 1,155,000 1155000 Notes: 1. The issued shares capital is made up of 400 million ordinary shares, each fully paid up, and 100 million 6 percent cumulative preference shares. II. Preference dividends are in arrears for two years III. There is contingent liability of RM4 million The scheme agreed to by all parties and sanctioned by the court is as follows: 1. Each ordinary share is to be converted into one fully paid ordinary shares of 25 sen and the existing ordinary shareholders are to subscribe for one ordinary share for every one held at 35 sen per share payable in cash. 2. The 6 percent cumulative preference share are to be cancelled and in return the preference shareholders are to receive one 7 percent preference share of RM1 each and two 24 sen ordinary shares for every two 6 percent cumulative preference shares held. The preference shareholders agreed to waive 50 percent of the preference dividend in arrears and accept ordinary shares of 25 sen for the balance of the preference dividends in arrears. 3. The directors agreed to convert their loans to 5 percent debentures of nominal value RM100 million. 4. The accumulated losses, Intangibles, bad debts of RM5,000,000 and inventories of EM 10,000,000 are to be written off. 5. The following value to be adopted: RM'000 Land 170,000 Building 300,000 Equipment 46,000 Additional Information: 1. Cost of reconstruction amounted to RM1.3 million. II. Contingent liability materlalized and the insurance company Indemnifled the company to the amount of RM3 million. Required: a) Journal entries to record the above transaction and b) Statement of financial position of Richard Bhd. immediately after the reconstruction
