ACC4284

CONSOLIDATED FINANCIAL REPORTING

Repetitive Practices

Amount written off share capital

Issued and paid up capital

Ordinary shares of RM 1 each RM 500,000
10% Preference shares of RM1 each 300,000

1. The ordinary shares were reduced to RM0.40 each and the preference shares were to be
reduced by RM0.40 each.

Dr Ordinary Share capital (500,000 units x 60 sen) RM 300,000

Cr Capital reduction RM 300,000

Dr Preference shares (300,000 units x 40 sen) RM 120,000

Cr Capital reduction RM120,000

2. The value of ordinary shares was brought down to RM0.50 each, while preference shares
were decreased by RM0.30 each.

Dr Ordinary Share capital (500,000 units x 50 sen) RM 250,000

Cr Capital reduction RM 250,000

Dr Preference shares (300,000 units x 30 sen) RM 90,000

Cr Capital reduction RM90,000

3. Each ordinary share was adjusted to RM0.80, and each preference share saw a reduction
of RM0.25.

Dr Ordinary Share capital (500,000 units x 20 sen) RM 100,000

Cr Capital reduction RM 100,000

Dr Preference shares (300,000 units x 0.25 sen) RM 75,000

Cr Capital reduction RM 75,000
4. Ordinary shares were revised to RM0.60 per unit, and preference shares were lowered by
RM0.40 each.

Dr Ordinary Share capital (500,000 units x 40 sen) RM 200,000

Cr Capital reduction RM 200,000

Dr Preference shares (300,000 units x 40 sen) RM 120,000

Cr Capital reduction RM 120,000

5. The nominal value of ordinary shares dropped to RM0.15, while preference shares were
reduced by RM0.75 each.

Dr Ordinary Share capital (500,000 units x 85 sen) RM 425,000

Cr Capital reduction RM 425,000

Dr Preference shares (300,000 units x 75 sen) RM 225,000

Cr Capital reduction RM 225,000

6. Ordinary shares were decreased to RM0.25 each, with preference shares seeing a
reduction of RM0.35 each.

Dr Ordinary Share capital (500,000 units x 75 sen) RM 375,000

Cr Capital reduction RM 375,000

Dr Preference shares (300,000 units x 35 sen) RM 105,000

Cr Capital reduction RM 105,000

7. Each ordinary share was revalued at RM0.70, and preference shares were cut down by
RM0.30.

Dr Ordinary Share capital (500,000 units x 30sen) RM 150,000

Cr Capital reduction RM 150,000

Dr Preference shares (300,000 units x 30 sen) RM 90,000

Cr Capital reduction RM 90,000
8. The ordinary share value was reduced to RM0.65 per share, and preference shares were
written down by RM0.85 each.

Dr Ordinary Share capital (500,000 units x 35 sen) RM 175,000

Cr Capital reduction RM 175,000

Dr Preference shares (300,000 units x 85 sen) RM 255,000

Cr Capital reduction RM 255,000

9. Ordinary shares were brought to RM0.45 per unit, while preference shares were lessened
by RM0.55 each.

Dr Ordinary Share capital (500,000 units x 55 sen) RM 275,000

Cr Capital reduction RM 275,000

Dr Preference shares (300,000 units x 55 sen) RM 165,000

Cr Capital reduction RM 165,000

10. Each ordinary share was adjusted to RM0.40, and the value of preference shares was
reduced by RM0.70 each.

Dr Ordinary Share capital (500,000 units x 60 sen) RM 300,000

Cr Capital reduction RM 300,000

Dr Preference shares (300,000 units x 70 sen) RM 210,000

Cr Capital reduction RM 210,000

11. Ordinary shares were revised to a new value of RM0.80, and preference shares were written
down by RM0.20 each.

Dr Ordinary Share capital (500,000 units x 0.20 sen) RM 100,000

Cr Capital reduction RM 100,000

Dr Preference shares (300,000 units x 20 sen) RM 60,000

Cr Capital reduction RM 60,000
Preference share dividend in arrears

Issued and paid up capital

Ordinary shares of RM 1 each RM 200,000
8% Preference shares of RM1 each 250,000

Note :
 Preference share dividend is three years in arrears
 The ordinary shares were reduced to RM0.30 each and the preference shares were to
be reduced by RM0.30 each.

1. The preference shareholders have agreed to waive 30% of the dividend in arrears and to
receive ordinary shares at new par value for the balance.

Dr Capital reduction (RM 60,000 x 1 unit x 70% ) RM 42,000

Cr Ordinary Share capital RM 42,000

2. Thirty percent of preference dividends in arrears are to be cancelled.

Dr Capital reduction (RM 60,000 x 1 unit x 70% ) RM 42,000

Cr Ordinary Share capital RM 42,000

3. The existing preference shareholders agreed to receive two new ordinary share at a new par
value for every RM2 of preference dividends in arrears.

Dr Capital reduction (RM 60,000 x 2 unit x 0.70/2 ) RM 42,000

Cr Ordinary Share capital RM 42,000

4. The preference shareholders agreed to forgo 25% of dividends in arrears and accept ordinary
shares for the remaining amount.

Dr Capital reduction (RM 60,000 x 1 unit x 75 % ) RM 45,000

Cr Ordinary Share capital RM 45,000
5. A quarter of the preference dividends will be waived, and the balance settled through the
issue of 150,000 ordinary shares at new par value.

Dr Capital reduction (RM 60,000 x 1 unit x 3/4 ) RM 45,000

Cr Ordinary Share capital RM 45,000

6. The company will issue 185,000 units of ordinary shares at RM0.50 each for the preference
dividends in arrears.

Dr Capital reduction (RM 185,000x0.50 ) RM 92,500

Cr Ordinary Share capital RM 92,500

7. Preference shareholders agreed to convert arrears into two ordinary shares at new par for
every RM1.50 owed.

Dr Capital reduction (RM60,000x 2 units x 0.70/1.50 ) RM 56,000

Cr Ordinary Share capital RM 56,000

8. A portion (30%) of the preference dividend arrears will be written off, and the remaining will
be settled through the issues of 100,000 units of ordinary shares at new par value for the
balance.

Dr Capital reduction (RM60,000x 1 units x 0.70) RM 56,000

Cr Ordinary Share capital (100,000x0.30) RM 56,000

9. The company offered one new ordinary share for every RM1 of arrears after cancelling 20%
of preference dividends in arrears

Dr Capital reduction (RM60,000x 1 units x 0.80) RM 48,000

Cr Ordinary Share capital RM 48,000
10. Preference shareholders will cancel 35% of dividend arrears and accept new ordinary shares
for the balance.

Dr Capital reduction (RM60,000x 1 units x 0.65) RM 39,000

Cr Ordinary Share capital RM 39,000

11. Unpaid dividends on preference shares will be quarterly waived and the rest converted into
ordinary share.

Dr Capital reduction (RM60,000x 1 units x 3/4) RM 45,000

Cr Ordinary Share capital RM 45,000

12. Twenty five percent of arrears will be written off; the balance settled with new ordinary shares.

Dr Capital reduction (RM60,000x 1 units x 0.75) RM 45,000

Cr Ordinary Share capital RM 45,000

13. 500,000 units of ordinary shares are to be issued at new par value as full settlement of
dividends in arrears

Dr Capital reduction (RM60,000x 0.70) RM 42,000

Cr Ordinary Share capital RM 42,000

14. The preference shareholders consented to cancel RM0.70 of every RM2 in arrears and
receive new shares for the rest.

Dr Capital reduction (RM60,000x 1 units x0.70/2) RM 21,000

Cr Ordinary Share capital RM 21,000
Asset Disposal to Settle Liabilities

Assets
Land and buildings RM 200,000
Machinery and equipment 150,000
Investment 250,000

Liabilities
Bank overdraft 145,000
Creditors 200,000

1. The investment was sold at a profit of RM25,000. The proceeds were used to settle the
creditors in full.

Dr Creditor RM 200,000
Cr Cash/Bank RM 200,000

2. The investment was sold at a loss of RM85,000. The proceeds were used to settle the
creditors in full.
Dr Creditor RM 165,000
Cr Cash/Bank RM 165,000

3. A loss of RM30,000 was made from the sale of the machinery and equipment, and the
proceeds was applied to settle the bank overdraft balances.

Dr Bank Overdraft RM 120,000

Cr Cash/Bank RM 120,000

4. The land sale generated RM150,000 in profit, and the funds were used entirely to pay off
creditors and bank overdraft.

Dr Creditor RM 200,000
Cr Cash/Bank RM 200,000

Dr Bank Overdraft RM 145,000

Cr Cash/Bank RM 145,000

5. The investment is to be sold at the current market price of RM185,000. RM150,000 is to be

paid for creditors as full settlement of the debts.

Dr Creditor RM 150,000
Cr Cash/Bank RM 150,000
6. The machinery was sold at its book value, and the proceeds were used to settle the bank
overdraft.

Dr Bank Overdraft RM 200,000

Cr Cash/Bank RM 200,000

7. The land was sold at a slight loss of RM10,000, and the cash received was used to settle the
creditors.

Dr Creditor RM 145,000
Cr Cash/Bank RM 145,000

8. RM125,000 of the creditors was settled in cash and the remaining balance was written off.

Dr Creditor RM 125,000
Cr Cash/Bank RM 125,000

9. RM300,000 was received from the sale of investments, which was used to fully clear the
outstanding liabilities.

Dr Liabilities RM 300,000
Cr Cash/Bank RM 300,000

10. A loss of RM20,000 was earned from selling the machine and equipment, and the funds were
applied to repay the bank overdraft.

Dr Bank Overdraft RM 130,000

Cr Cash/Bank RM 130,000
11. The investment sale generated enough proceeds to fully settle both the creditors and part of
the bank overdraft.

Dr Creditors RM 130, 000

Cr Cash/Bank RM 130,000

Dr Bank Overdraft RM 145,000

Cr Cash/Bank RM 145,000

12. Machinery worth RM80,000 was sold for a RM25,000 profit to pay the creditors. The rest of
the machinery was sold for RM100,000 to fully settle the bank overdraft.

Dr Creditors RM 105, 000

Cr Cash/Bank RM 130,000

Dr Bank Overdraft RM 100, 000

Cr Cash/Bank RM 100,000
Contingent Liabilities

Notes:
There is a contingent liability of RM20,000,000.

1. The RM20 million contingent liability has been realized.

Dr Capital reduction RM20m

Cr Bank RM20m

2. The contingent liability amounting to RM18 million has materialized.

Dr Capital reduction RM18m

Cr Bank RM18 m

3. The RM15 million contingent liability has become an actual obligation.

Dr Capital reduction RM15m

Cr Bank RM15 m

4. The contingent liability for which no provision had been made was settled at RM20 million
and all amount was recovered by the insurers

Dr Capital reduction RM20m

Cr Bank RM20 m

5. The contingent liability for which no provision had been made was settled at RM15 million
and of this amount, 75% was recovered by the insurers

Dr Capital reduction RM15m

Cr Bank RM15 m
 Tutorial Questions

Question 1

Tembikai Putih Bhd

Statement of Financial Position as at 30 June 2024
Non-Current Assets RM’000 RM’000
Freehold land and building 195,000
Equipment 100,000
Investment 45,000
Goodwill 94,000 434,000

Current Assets
Inventories 100,000
Bills receivables 40,000
Trade receivables 52,000 192,000
626,000

Authorised and paid up capital:

200,000,000 7% cumulative preference shares of RM1.00 each 200,000
300,000,000 ordinary shares of RM1.00 each 300,000 500,000

Accumulated losses (200,000)

300,000
Non-Current Liabilities
10% debentures 100,000

Current Liabilities
Debenture interest 9,000
Loan from directors 70,000
Trade payables 88,000
Bank overdraft 59,000 226,000
626,000

Notes:
i. Preference dividends are in arrears for three years.
ii. There is a contingent liability of RM20,000,000 which has not been recorded.

During a meeting of shareholders and directors, it was decided to carry out a scheme of
reorganization. The following scheme of capital reduction was agreed upon:

1. The preference shares are to be reduced by RM0.10 per share and the ordinary shares to
RM0.30 per share.
2. The preference dividends in arrears are to be cancelled.
3. Existing ordinary shareholders agreed to subscribe for cash 150,000,000 new issue of
ordinary shares at new par value.
4. The debenture holders agreed to reduce their interest rate from 10% to 9%.
5. RM80,000,000 of trade payables is paid by cash at 90 sen for every RM1.00 owed.
6. The remaining trade payables are settled by way of one ordinary share at the new par value
for every RM1.00 balance outstanding.
7. The following assets were revalued:
Equipment RM125,000,000
Inventories 95,000,000
8. The investment is disposed of at a profit of 30% in order to settle the bank overdraft
9. The contingent liability of RM18 million materialised and the company recovered thirty
percent of the amount from the insurance company.
10. RM50 million of the loan from directors was settled in cash and the remaining balance was
written off.
11. Goodwill and accumulated losses are to be written off.
12. As settlement for the debenture interest, debenture holders agreed to take over a piece of
land, cost RM6 million as part of the settlement and the remaining balance to be converted
into 9% debentures. The remaining freehold land was valued at RM200 million.

Required:
a. Journal entries to record the above-mentioned information.

b. Statement of Financial Position for Tembikai Putih Bhd immediately after the capital
reduction (Please show the bank account)
Question 2

Kayu Kayan Bhd was experiencing financial difficulties and decided to carry out an internal
restructuring plan. A special resolution was passed, and the court gave its blessing to the
reconstruction. Kayu Kayan Bhd balances as of 30 June 2024 were as follows:
RM
Freehold land and building 244,800
Equipment 10,800
Goodwill 64,800
Investment (cost) 28,800
Inventories 135,000
Trade receivables 81,000
565,200

OSC of RM1 each 252,000

10% Cum. PSC of RM1 each 99,000
General reserve 106,200
Trade payables 111,600
Loan from directors 18,000
Bank overdraft 45,000
Accumulated losses (66,600)
565,200

Note:
1. The company owed RM18,000 in preference dividends
2. Contingent liability amounted to RM9,000.

The following facts relate to the capital reduction plan:

i. The 10 percent cumulative preference shares were reduced by 20 sen each, and each
ordinary share was reduced to 70 sen

ii. The plan will be funded using three-quarters of the general reserve account. The directors'
loan would be settled by issuing 27,000 new ordinary shares at a new par value.

iii. The RM7,500 contingent liability was realised, and the corporation paid the whole amount.

iv. The following assets would be revalued:

RM
Land and building 400,000
Equipment 8,900
Inventories 120,000

v. The trade receivables will be reduced by RM21,000 and goodwill and accumulated
losses will be written off.
 vi. The existing preference shareholders agreed to receive one (1) new ordinary share at
a new par value for every RM1 of preference dividends in arrears.

vii. The investment was sold for a total of RM26,000.

viii. The overall cost of reconstruction was RM22,000

You are required to prepare:

a Journalise the above transactions.

b Statement of Financial Position as at 30 June 2024 after reconstruction.

Question 3

The following are the accounts balances of Beg Bunga Bhd as at 31 October 2024 :
RM RM
OSC of RM1 each 250,000 Land and building 250,000
10% PSC of RM 2 each 150,000 Furniture & fittings (carrying value) 25,600
7% Debenture 50,000 Equipment (carrying value) 16,200
Debenture interest payable 10,500 Patents & trademarks 50,000
Trade payables 86,000 Investment 36,000
Loan from directors 30,000 Inventories 28,000
Bank overdraft 33,500 Trade receivables 44,400
Accumulated losses 159,800

610,000 610,000

Notes:
i. Preference dividends are in arrears for two years.
ii. There is a contingent liability of RM10,000,000
During a meeting of shareholders and directors, it was decided to carry out a scheme of internal
reconstruction due to the financial difficulties faced by the company. The following scheme has
been duly passed and approval of the court was obtained

(1) The existing ordinary share is to be written down to a nominal value of RM0.40 per share
(2) The existing preference shares are to be exchanged for a new issue of 40,000,000 12%
preference shares of RM2 each and 50,000,000 ordinary shares of RM0.40 each.
(3) 20,000,000 units of ordinary shares are to be issued at new par value as full settlement of
dividends in arrears
(4) The debenture holders agreed to accept 20,000,000 ordinary shares, each valued at
RM0.70, in lieu of the interest payable. The interest rate will be increased to 10%.
Additionally, RM100,000,000 worth of new 10% debentures will be issued and taken up
by the existing holders.
(5) The investment is to be sold for RM50,000,000
(6) The contingent liability materialized in full and the insurance company accepted a claim of
RM8,000,000.
(7) Bad debts of RM15,000 and obsolete inventories of RM21,000 will be written off.
(8) The remaining assets are professionally valued as follows :
RM
Land and building 350,000
Furniture & fittings 22,000
Equipment 18,000

Required:
a. Show the journal entries to record the above-mentioned information
b. Show the capital reduction and bank account
c. Prepare the Statement of Financial Position for Beg Bunga Bhd immediately after the
capital reduction
Question 4

Green Pillow Bhd has incurred trading losses in the past three years and is now in severe financial
difficulty. The company passed a special resolution to reduce its capital which was approved by
the court. The company’s statement of financial position as at 30 April 2024 showed the following
position :
Green Pillow Bhd as at 30 April 2024
Non-Current Assets RM Authorised & Issued Capital RM
Freehold Land 250,000 OSC of RM1 each 500,000
Building (carrying value) 259,000 8% PSC of RM 1 each 400,000
Equipment (carrying value) 83,000 Accumulated losses (290,000)
Goodwill 103,000 General reserve 80,000
Investment 65,000
Non-Current Liability
Current Assets 7% Debenture 200,000
Inventories 110,000
Account receivables 120,000 Current Liabilities
Accumulated losses 30,000 Bank overdraft 30,000
Accrued interest 25,000
Account payables 25,000

970,000 970,000

Notes:
Preference dividends was in arrears for three years.

Subsequent to approval by the court, the following capital reduction scheme was carried out :

13. The ordinary shares were to be reduced by 80 sen and the preference shares were
reduced to 40 sen.
14. The preference shareholders agreed to waive half of the dividend in arrears and accept
ordinary shares for the balance of the preference dividend in arrears
15. General reserve was be utilised for the scheme
16. The debenture holders agreed to accept RM52,000 of ordinary shares and RM150,000
8% debenture in exchange for their existing RM200,000 7% debentures
17. The investments were to be sold for RM50,000 and the proceeds were used to settle the
accrued interest
18. The cost of reorganization was RM5,000 and paid by cheque
19. The contingent liability for which no provision had been made was settled at RM5,000 and
of this amount, RM4,000 was recovered by the insurers
20. The freehold land was revalued to RM280,000 and the value of the building and equipment
each increased by 10%.
21. It had been expected that 8% of the account receivable cannot be collected while a quarter
of the inventories were obsolete and need to be written off
Required:

a. Show the journal entries to record the above scheme

b. Prepare the Statement of Financial Position for Green Pillow Bhd immediately after the
capital reduction

Question 5

Talam Tokyo Bhd is in financial difficulty. It has suffered huge losses for the past three (3) years.
The company decided to undertake a reconstruction scheme by reducing its capital. The
summarized Statement of Financial Position as at 30 September 2024 is given below:

Talam Tokyo Bhd

Statement of Financial Position as at 30 September 2024
RM RM
Issued and Paid-Up Capital Non-Current Assets
Ordinary shares of RM1 each 900,000 Land 500,000
5% preference shares of RM2 each 300,000 Building (carrying value) 300,000
Plant and machinery 70,000
(carrying value)
Reserves Goodwill 50,000
General reserve 30,000 Investments 60,000
Accumulated losses (700,000)
Current Assets
Non-Current Liabilities Inventories 140,000
7% debentures 500,000 Trade receivables 160,000
Cash and bank 20,000
Current Liabilities
Trade payables 200,000
Accruals 70,000

1,300,000 1,300,000
Reconstruction Scheme

The scheme was agreed upon by all affected parties, and approval from the court was obtained
with the following points:

1. Ordinary shares are to be reduced to RM0.50 each, and preference shares are reduced by
RM0.50 each.
2. General reserve is to be utilized for the scheme.
3. Accumulated losses and goodwill are to be written off.
4. The debenture holders agreed to accept a new debenture with 9% interest per annum to
replace the existing 7% debenture of the same nominal value.
5. The investment is to be sold at RM80,000.
6. Trade payables are to be paid RM50,000 in cash, with the balance settled by issuing
ordinary shares of RM0.50 each.
7. 40% of accruals are to be paid in cash, and the balance is to be cancelled.
8. RM10,000 of the trade receivables are to be written off as bad debts.
9. The remaining assets were professionally revalued as follows:
o Land RM 750,000
o Building 380,000
o Plant and machinery 45,000
o Inventory 100,000

Required:
a. Show the journal entries to record the above scheme
b. Prepare the Statement of Financial Position for Talam Tokyo Bhd immediately after the
capital reduction

Question 6

Happy Tummy Bhd has been trading for many years. Recently, due to the financial difficulties, it
has decided to reorganize in order to continue their business. The following is the list of balances
which extracted from the books of Happy Tummy Bhd :

RM RM
Issued and Paid-Up Capital Non-Current Assets
5% cumulative preference shares 300,000 Plant and machinery (CV) 270,000
ordinary shares of RM0.50 each 1,500,000 Land and building 422,000
Motor vehicle (CV) 450,000
Reserves
General reserves 90,000
Accumulated losses (406,500) Goodwill 45,000
Asset revaluation reserve 20,000
 Current Liabilities Current Assets
Trade payables 63,000 Inventories 251,000
Bank overdraft 82,000 Trade receivables 210,500
Cash and bank

1,648,500 1,648,500

Notes:
Preference dividends were in arrears for three years.

The following scheme was authorized by the court:

1. The nominal value of the ordinary shares is to be reduced to RM0.30.

2. The 5% cumulative preference shares will be cancelled and four new 10% convertible
preference shares of RM1.00 will be issued for every five preference shares held.
3. As a full settlement of the preference dividend in arrears, the company issued 80,000
ordinary shares at par to the preference shareholder.
4. RM90,000 10% debentures were issued at par. The proceeds of debentures were used to
settle the bank overdraft.
5. A quarter of the asset revaluation reserve was to be utilized for the scheme.
6. The accumulated losses and intangible assets were to be written off.
7. The following assets were to be revalued at:
Plant and machinery RM 200,000
Land and building 500,000
Equipment 415,000
Inventories 180,000
Trade receivable 205,000

Required:
a. The journal entries (without narration) to record all the above transactions.

b. The Statement of Financial Position after the completion of the above scheme.
Question 7

Helmet Biru Bhd has been operating at a loss for several years. The following list of balances
was extracted from the books of Helmet Biru Bhd as at 30 June 2024.

RM’000
Ordinary shares of RM2 each 500,000
5% Cumulative preference shares of RM1 each 300,000
5% Debentures 100,000
Debenture interest payable 15,000
Loan from directors 60,000
Trade Payables 23,000
Bank overdraft 3,000
1,001,000

Freehold Land 50,000

Building (net book value) 40,000
Machineries (net book value) 52,600
Motor Vehicles (net book value) 88,680
Patent & Trademarks 50,000
Investments 160,000
Inventories 45,800
Trade Receivables 31,620
Accumulated losses 482,300
1,001,000

During a meeting of shareholders and directors, a resolution was passed to have the affairs of the
company reorganized. The following scheme has been duly passed and approved by the court:

1) The ordinary shares and 5% Cumulative Preference Shares are to be reduced by RM1.20
and RM0.50 respectively.
2) The interest rate for the 5% Debentures is to be increased to 6%. The existing debenture
holders has agreed to take up a new issue of 50,000,000 6% Debentures at 95. The
debenture holders have also agreed to accept 4,000,000 ordinary shares at the new par
value in lieu of the interest payable
3) The assets were valued as follows:
RM'000
Freehold Land 80,000
Building 85,000
Machineries 35,000
Motor Vehicles 65,000
Inventories 35,000
Trade Receivables 20,000
4) RM 10,000,000 of directors' loan is to be cancelled. The balance is to be settled by the issuance
of ordinary shares at the new par value.
5) The investment is to be sold at the current market price of RM185,000,000.
6) RM21,000,000 is to be paid for trade payables as full settlement of the debts.

Required:

a) Journal entries to record the reconstruction scheme.

b) Statement of Financial Position immediately after reconstruction.