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Question 3 Park Bhd found itself in financial difficulty and decided to reorganize its affairs. Due to the financial difficulties faced by the company, it has decided to carry out a scheme of internal reconstruction which was approved by the court. The following is a trial balance as at 31 December 2020 extracted from the books of the company. RM Non-current assets Freehold land 400,000 Building 275,000 Plant and machinery 27.850 Patent & trademark 47,500 Investment 171,000 921,350 Current assets Inventories 42,500 Trade receivables 81,500 1,045,350 Equity and reserves Ordinary shares of RM1.00 each 500,000 6% cumulative preference shares of RM2 each 300,000 Accumulated losses (36,150) 763,850 Current liabilities Debenture interest payable 11.250 Trade payables 136,500 Loan from directors 76,500 Bank overdraft 57 250 1,045,350 The following scheme has been approved by the court 1. Ordinary share of RM1 each was reduced to 60 sen for each share. 2. The existing preferences shares are to be exchanged for a new issue of 75,000 8% cumulative preference shares of RM2.00 each and 250,000 ordinary shares of 60 sen each The loan from directors is to be settled by the issue of ordinary shares at a new par value. 3. 4. Patent and trademark and accumulated losses are to be written off. 5. Half of the trade payables are to be paid now and the balance at quarterly intervals. 8. 5% of the trade receivables are to be written off. 9. The remaining assets were professionally valued as follows: RM Freehold Land Building Plant and machinery Investment Inventories 450,000 255,000 22,150 185,000 27,000 Required: a) Journalise the above transactions. (20 marks) b) Prepare the capital reduction account (5 marks) c) Section 116 of the Companies Act 2016 allows a company to reduce its capital in the three (3) situations. Briefly explain these three (3) situations with example