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Question 1 Statement of Financial Position of Rino as at 31 December 20X6 000s Non-Current Assets Goodwill 187 Patents 170 Development costs 259 Land and

Question 1

Statement of Financial Position of Rino as at 31 December 20X6

000s

Non-Current Assets

Goodwill

187

Patents

170

Development costs

259

Land and buildings

2870

Plant and machinery

1715

Motor vehicles

329

Investments

150

5680

Current assets

Trade receivables

465

Inventory

380

845

Total Assets

6525

Equity and liabilities

Ordinary shares at 1 each

6000

Share premium

145

6% Cumulative preference shares at 1 each

1200

Retained earnings reserve

-2250

5095

Long term liabilities

5% Debentures

1000

Current liabilities

Bank overdraft

165

Trade payables

265

430

Total equity and liabilities

6525

The following reconstruction scheme has been proposed by the directors:

  1. The ordinary shares to be reduced to 60% per share from par value and the preference shares reduced to 40% each from par value. Both classes of shares will subsequently be combined and converted into ordinary shares of 1 per value, the balance on the share premium account to be written off.
  2. Assets are revalued as follows:

I)Plant & machinery 165,000

II)Motor vehicles 278,000

  1. Trade payables agree to receive 100,000 cash and any remaining balances will be settled by receiving 2 ordinary shares for every 3 owed.
  2. The debenture holders takeover a piece of land (cost 180,000) at an agreed value of 245,000 in part settlement of the principal outstanding and any remaining balance will be settled by issuing two ordinary shares of 1 each for every 5 of debentures outstanding.
  3. Investments to be sold at a value of 285 000.
  4. The accumulated losses and goodwill will be written off.
  5. Cost of reconstruction will amount to 2000.
  6. Balance of reorganisation account will be adjusted with plants

Required

Process the transactions required by the scheme and prepare a revised Statement of financial position after completion of the scheme.

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