Question $2$

Given below is the Statement of Financial Position of Muharram Berhad as at $30$ June $2022.$

Mubaram Berhad has been incurring trading losses for several years and is now in severe

financial difficulty. The company passed a special resolution, and the approval of the court

was obtained for the following scheme of reconstruction:

i$.$ The ordinary shares are to be written down to RM$0\mathrm{.}25$ per share and then converted

into new ordinary shares of RM$1$ per shares fully paid. The preference shareholders are

to receive $100,000$ ordinary shares of RM$1$ per share, fully paid at par, in exchange for

their $7\%$ Preference Shares.

ii$.$ The $7\%$ preference shares dividends are two years in arrears. The preference

shareholders have agreed to accept $1$ new ordinary share of RM$1$ per share for every $1$

of RM$1$ preference dividend in arrears.

iii. The creditors have agreed to take $200,000$ new ordinary shares of RM$1$ per share, fully

paid up at par, in part satisfaction of the sum due to them.

iv$.$ The accumulated loss and prepayments are to be written off.