QUESTION 1 The following was the balance sheet of Saja Jaya Ltd on 31st March 2009 Balance Sheet

RM Fixed Assets Goodwill and trade marks Plant and machinery (net) Furniture and fitting Current Assets Stock Sundry debtors Cash in hand Authorised Capital 80,000 50,000 7% preference share @ 75,600 RM1 10,200 700,000 ordinary share @ RM0.50 RM

50,000 350,000 400,000

61,950 Issued and Fully Paid Capital 26700 55,000 7% preference share @ 5050 RM1 410,000 ordinary share @ RM0.50 Capital reserve Profit and loss Current Liability Sundry Creditor Bank Overdraft 259,500

55,000 205,000 21,000 (56,300)

15,600 19,200 259,500

The following scheme of capital reduction was sanctioned by the court and agreed by the shareholders: a. b. c. d. Preference share were to be reduced to RM0.50 each. Ordinary share were to be reduce to RM0.10 each. The capital reserve was to be eliminated. The reduce shares of both classes were to be consolidated into new ordinary share of RM1 each. e. An issue of RM65,000 8% debentures at par was to be made to provide fresh working capital. f. The sum written off the issued capital of the company and the capital reserve to be used to write off the debit balance of the profit and loss account and to reduce fixed asset by the following amounts: Goodwill and trademarks RM70,000 Plant and machinery RM25,000 Furniture and fitting RM9,000 g. The bank overdraft was to be paid off out of the proceeds of the debentures which were duly issued and paid in full. A further resolution was passed to restore the authorized capital of the company to 400,000 ordinary share of RM1 each. You are required to prepare journal entries to give the effect to the above scheme and draw up the balance sheet of the company after completion of the scheme. Hak Milik Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja

ANSWER Journal Entries RM 27,500 164,000 164,000 21,000 21,000 27,500 41,000 68,500 65,000 65,000 56,300 70,000 25,000 9,000 19,200 19,200 RM 27,500

a. b. c. d.

e. f.

g.

Preference share Capital conduction account Ordinary share Capital conduction account Capital reserve Capital conduction account Preference share Ordinary share Ordinary share Bank 8% debenture Capital conduction account Profit and loss Goodwill and trademarks Plant and machinery Furniture and fitting Overdraft bank Bank

Capital Conduction Account RM 56,300 Preference share 70,000 Ordinary share 25,000 Capital reserve 9,000 52,200 212,500 RM 27,500 164,000 21,000

Profit and loss Goodwill and trademarks Plant and machinery Furniture and fitting Reserve

212,500

Hak Milik Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja

Balance Sheet RM Fixed Assets Goodwill and trade marks Plant and machinery (net) Furniture and fitting Current Assets Stock Sundry debtors Cash in hand Bank Authorised Capital 10,000 50,000 7% preference share @ 50,600 RM1 1,200 700,000 ordinary share @ RM0.50 RM

50,000 350,000 400,000

61,950 Issued and Fully Paid Capital 26700 Ordinary share 5050 Reserve 45,800 Long Term Liability 8% debenture Current Liability Sundry Creditor 201,300

68,500 52,200

65,000

15,600 201,300

Hak Milik Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja