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1.)   Based on the Q&A Example, it is an internal reconstruction. This is due to the internal reconstruction involves reducing the par value of ordinary shares and preference shares or dispose of the value of a company not to call.

2.) Yes, it is, the shareholders are having losses and we need to record it in the journal entry

Dr ordinary Shares

Cr Capital Reduction

3.) The ordinary shares agree to purchase additional share even though the share price had been reduced because the existing shareholders have more opportunities to receive dividend payments because the company had written all of the accumulated losses. Besides, by reducing the share price, the shareholders able to buy more shares with a cheaper price if compare to the price before reduce.

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i. Calculation in the Q&A example is related to internal reconstruction. This is because the company is reducing the par value of the ordinary shares.

ii. Yes , the shareholders are having losses .Yes we have record in journal entries .

iii. The shareholders can purchase additional shares for a cheaper price .

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i.          It is an internal reconstruction. The Q&A example teach us how to record journal entries when a company willing to reconstruct internally and reduce it capital.

ii.          No, adding to a position when the price drops, or buying the dips, can be profitable during secular bull markets.

Yes, we have to record it in the journal entries.

iii.          The shareholders are willing to purchase the shares although the company not in financial stable because it adds more to a good position when prices are relatively cheaper.

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1. internal reconstructions
2. Yes, the shareholders will be having losses and need to record them in journal entries.
3. The existing ordinary shareholders purchase the additional shares that are being reduced because it is cheaper or low price resulting in them being able to purchase more

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1. Based on our understanding, the QA question relates to the content in the lecture slides by doing capital reductions. The capital reduction is being done by using Internal reconstructions. This is because their ordinary shares was reduced and internal reconstruction happens when ordinary shares is reduced.

2. Yes. Yes.

3. In our opinion, this happens when a company’s board of directors publicize their solvency statements which proves that they can pay off their debts. This increases the shareholder’s trust in the company even though they did a capital reduction as once the debt is settled, then the shares will be worth it again.

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1. It is internal reconstruction because it involves reducing the par value of ordinary share from RM1 to RM0.30.
2. Yes, because it's reduce the original price of the share and we have to do the journal entries for the new cost of ordinary share.
3.The shareholders agree to purchase eventhough the price have been reduced because they can buy a lot more shares and receive greater profits in the future.

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i. In our opinion, the calculation in the Q&A example shows a capital reduction, where the number of shares in the company will decrease by the reduction amount. It is an internal reconstruction because there is a capital reduction that involved reducing the par value of ordinary shares.

ii. Yes, the company will be having a loss. The losses of RM 0.70 of ordinary shares will be recorded in journal entries as capital reduction.

iii. It is because since the share price has been reduced then the shareholders can purchase additional shares to increase their number of common stocks.

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1. it is an internal reconstruction because the company have surplus capital that was eroded by trading losses. it had involved reducing the par value of ordinary shares.
2. yes it must record in the journal entries because it shows the reduction in the ordinary shares from RM1 to RM0.30. besides, the shareholders will affect will the losses incurred.
3. This is because the purchase of these additional shares would lead to a stock selloff and it can also help the company from going under as they would be able to use the money, they got from these additional purchases to help pay off outstanding company debts.

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i. It is an internal reconstruction. Reducing the par value of ordinary shares and ordinary shares.
ii. Yes, the shareholders will having losses because of the share price reduce from RM 1 to RM 0.30. This situation have to record in the journal entries.
iii. Shareholder agree to purchase additional shares even though the share price had been reduced because shareholders can get more opportunities to receive dividend payments if the company is experiencing a deficit in retained earnings.

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1. Calculation in the Q& A example relate to the content is about internal reconstruction. This is due to not all assets in the business are liquidated to raise cash in order to settle the liability of company. For example, the assets such as motor vehicle has liquidated. However, land and building have not liquidated, which is still remained the same value. Furthermore, par value of ordinary share has also been reduced.
2. Since the share price has been reduced, it means that there will be reduction in shareholder equity. When it has been reduced, shareholder can gain back their money in the way of cash. In addition, the reduction which is RM0.70 need to be record in the journal entry.

3. Existing ordinary shareholders agree to purchase additional shares due to they can buy the additional share through a lower price. In this case, they will own more share of the company. When the share value increase, shareholder can sell it and gain back their money. It symbolizes that the company’s shareholder are far sighted because they have think about the impact of the future. On the other hand, company can use this money to settle their debt and obligation.

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1) Internal reconstruction. It is because the company still wanted to manage their business and capital reduction still happened.
2) The shareholders having losses because of ordinary share is low. eventhough the ordinary share is low, we still have to record in journal entry.
3) The possibility of ordinary share this time is at a low price. and the price will becomes high in the future. so that they can generate more profit.

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i. Internal reconstruction.

ii. Yes. The shareholders will be having losses and need to record them in journal entries.

iii. expecting profit in the future

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1) It is an internal reconstruction. This is because the company may have surplus capital or capital was eroded by trading losses which caused the company to reduce the par value of ordinary shares from RM0.70 to RM0.30.

2) No, when share price is reduced it provides a more efficient capital structure and increases shareholder value. Therefore, we do have to record it in the journal entires because when a company has a capital reduction, the reserve arising from a reduction is treated as a realised profit and is distributable immediately. It is also to eliminate a deficit on the company’s profit and loss account and thereby enable the company to pay dividends.

3) Since the share price has been reduced, the existing shareholders are able to purchase additional shares at a discounted price compared to the market price which allows the shareholders a chance to increase their exposure to the stock.

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1.The calculation in the q&a example related to the contain in the lecture slides. Reduction Bhd eliminated a deficit on the company profits and loss account and thereby enable the company to pay dividend. Internal reconstruction.
2. The shareholders having losses. Yes we have to record it in the journal entries.
3.Shareholders agree to purchase additional share to have more opportunities to receive dividend payments

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i. Internal reconstruction. It involves reducing the par value of ordinary share.
ii. Yes. Because its reduce the original price of the share and that is the accumulated losses they have to be liable to. Yes, they have to record the journal entry.
iii. The shareholders agree to purchase eventhough the price have been reduced because they can buy a lot more share and receives greater profits.

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1)This is an internal reconstruction because it involves reducing the par value of ordinary shares.

2)Yes the shareholders will facing losses.
Journal entries: Dr   capital reduction account
Cr accumulated losses account

3)• to have more opportunity to receive dividend payment
• if the company is experiencing a deficit in retained earnings.

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I.         The calculation in the Q&A example can relate to the content due to the existence of the capital reduction. As can be seen from the example, the company has been reducing the price of their share capital. Therefore, the company is using the internal reconstruction. It is a process where the company decides to reduce the par value of ordinary shares.

II.         The shareholders not having losses when the share price is reduced. The shareholders should not be liable for the amount reduced.  In addition, we need to record it in the journal entries to write off the liable amount when a share price is being reduced.

III.         Existing ordinary shareholders would buy additional shares when the price had been reduced because the more the amount of shares they own, the more opportunities for them to receive dividend payments. Moreover, the shareholders would also receive investment gains once the price of shares increases.

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i. Internal reconstruction. This is because when the company have surplus capital or whose capital was eroded by trading losses. It involves reducing the par value of ordinary shares and preference shares or dispose of the value of a company not to call.

ii. Yes. Because company reduced the share price to RM0.30. The shareholders will be having losses and need to record them in journal entries.

iii. Because they want to take up future profits.

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1. it is an internal reconstruction.
2. the shareholder will have losses. so we need to record it in a journal entries as a capital reduction.
3. the shareholder agree to purchase additional shares eventhough the price had been reduced because they aim to get the profit when the share price increasing.

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i. The calculation in the Q&A example is related to internal reconstruction. The reason to this is because it can be seen that the company is reducing the par value of its ordinary share

ii. Since the share price is reduced, the shareholders are having losses since the price of the shares reduced RM0.70 from its original price and that is the accumulated losses they have to be liable to. Yes, we have to record it in the journal entries. Debit capital reduction; Credit Accumulated losses

iii. Since the share price is reduced, the shareholders are experiencing losses of RM0.70 per unit shares. Now that the price of unit share is RM0.30, they agree to buy additional unit of shares and will have two units of share with the price of RM0.60. By buying two units of the share with the new share price, they can reduce their losses from RM0.70 to only RM0.40.

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1) The calculation is related to the content in the lecture slides because of the use of capital reduction. The capital reduction is the Internal Reconstruction.
2) The shareholder is having a gain from the reduce of share price because it helps to return excess capital to the shareholder and paying dividend immediately. It should be recorded in the journal entry by recording share price in the debit side and capital reduction in the credit side.
3) Shareholders agree to purchase additional shares because it is cheaper to buy, and they can buy more units and gain more profit.

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i.            The Q&A example is an internal reconstruction because it involves reducing the par value of ordinary shares or in the other words, there is a capital reduction.

ii.            If the share price is reducing, the shareholders will be having losses. We need to record RM0.70 in the temporary account called capital reduction.

iii.            The shareholders agree to purchase the additional shares even though the share price has been reduced because they think that there is a possibility that the share price will increase in the future. Regardless, it’s a win-win situation by purchasing the shares at a lower price.

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i) The Q&A example relate to the content in the lecture slides is internal reconstruction. The Reduction Bhd have surplus capital or whose capital was eroded by trading losses.

ii) Yes, they are having loss. We have to record in jornal entries

iii) The company is giving shareholders a chance to increase their exposure to the stock at a discount price.

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1) It is an internal reconstruction. This is because the company was reduced the ordinary share value from RM5 to RM3, which means that it involves reducing the par value of ordinary share instead of liquidating all the assets.

2) If the share price is reduced from RM1 to RM0.30, the shareholders will be having losses. We must record it in the journal entries.

3) The existing ordinary shareholders agree to purchase additional shares even though the share price had been reduced because they can purchase the additional shares in a low price that can reducing the average price of purchasing the shares. At the same times, this also can define as an average down strategic.

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1)Internal because it involves reducing the par value of ordinary shares.

2)Yes, the shareholders having losses because the ordinary shares of 31 December x9 is RM2500000 but after the share price reduced from RM1 to RM0.30, the ordinary shares decrease to RM1000000.Yes,we have to recorded in journal entries.

3) Existing ordinary shareholders agree to purchase additional shares even though the share price had been reduced because shareholders can have more opportunity to receive dividend payments ,if the company is experiencing a deficit in retained earnings.

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1. In the last tutorial we notice that the capital company had to be reduction which is  trade payable on debit and the capital reduction is on credit. This is because the company wanted to sattle their overdraft bank by pay or the account payable that not have been paid yet  which is RM200,000. This main shown that the company use their capital to pay or the account payable. In our opinion, this example shown that this is an internal reconstruction. This is because these example show that their ordinary share have been reduce. This effect are shown because their capital had been reduce.

2. In our opinion, for every transaction must record in the journal entries. This is because their need to record their ordinary share whether it is decrease or increase and it can be easily for the company to record in the financial statement and based on the example it shown the share holder have having losses for their company untill RM0.70

3. In our opinion, the share holder still agree to purchase additional share, because they wanted to increase ownership in the specific company. This is because their company wanted to increase their profit while their share price had been reduce.

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i) The reduction Bhd wants to eliminate a deficit on the company’s profit and loss account and thereby enable the company to pay dividends is the reason for the capital reduction of the share capital. Internal reconstruction. This is because the question includes the internal re-organization of the financial structure of a company. This question also includes share capital is reduced to write off the past accumulated losses of the company. The ordinary share write-off of RM0.70 x 300,000 shares.

ii) The shareholder is having losses because when the ordinary share goes down, the shareholder loses money on their investment. Yes, we need to record it in the journal entry, ordinary share debit RM210,000 and credit capital reduction RM210,000.

iii) Because they want to raise money for expansion, buying out a competitor, or introducing of a new product. Plus, when a company issues new stock, it is usually in a positive light. Also, it increases the number of common stocks being traded in the stock market.

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i) The QnA is about capital reduction which is based on Chapter 4, reduction of capital. The company tried to decrease the ordinary shares by RM1 to RM0.30 to reduce their capital to eliminate a deficit on the company's profit and loss. It is an internal reconstruction because in the question the company reduce the ordinary shares of the value.

ii) No, it doesn't affect the shareholders. Instead,the shareholders can buy more ordinary shares in a cheaper price because the ordinary shares has decreased from RM1 to RM0.30 as the company has reducing the number of ordinary shares.
Yes, we have to record in journal entries by reducing ordinary shares in debit sides and credit the temporary account (capital reduction) because the ordinary shares has been written down to RM0.30 per share.

iii) Because the shareholders can buy more shares in a cheaper price. Existing shareholders of a company had an opportunity to buy additional shares directly from a company at a discount price.

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i. Similar. It is internal reconstruction
ii. No, the shareholders are not having losses. Yes it needs to be recorded.
iii. To have more opportunities to receive dividend payment

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i. The calculation can be relate to the slides because it involved the share cancellations and share repurchases.

The share capital is reduced to write off the past accumulated losses of the company. So, it is an internal reconstruction.

ii. Yes they're having losses. Yes must be record in the journal entries.

Dr Ordinary shares

Cr Capital Reduction

iii. When the share price is reduced, the price is low, so the shareholders can purchase additional or more shares at a certain period to increase their the number of common stock and to have more opportunities to receive dividend payments.

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i.                Based on the q and a example the company is related to external construction because of the company had to go through the process of winding. Winding up a company is a process where all assets are liquidated to raise cash to settle all the liability of the company.

ii.              No. because the shareholder is not having a loss but they will gain profit because they can buy a lot more share. they can save RM0.70. Also, this transaction has to record it in journal entries and need to record it as write-off. Which debit ordinary share write off and credit capital reduction. This is because being ordinary shares written down to RM0.30 per share.

iii.             This is because the shareholder that have a lot of shares, the profits are allocated to shareholders according to their stake in the company, and the shareholders report those profits as taxable income on their personal returns. In other words, the more they bought now the more they will gain in the future. Other than that, shareholder can gain dividend. Dividend is a cash reward given out to shareholders as part of the profit made by the company at the end of each financial year. The larger the units of the shareholdings one possesses, the more money one receives.

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i. Internal reconstruction
ii. The shareholders are not having losses since the new price of par value of ordinary shares is for the new share buyers, unless the existing shareholder wants to sell his/her share at RM0.30 when he/she purchase at RM1, then they face losses. Yes, this event have to be recorded in the journal entries
iii. The existing ordinary shareholders would purchase additional shares even the share price been reduced because to add additional equity in the company by purchasing the share for a lower price. At the same time, contributing to the company’s capital.

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i. Internal reconstruction – When the company capital was eroded by trading losses, and involves reducing the par value of ordinary shares.

ii. The shareholders are having losses when the share price is reduced. It need to be recorded in the journal entries where the ordinary shares account is debited and a temporary account named capital reduction is credited.

iii. It is because currently, the price of the share is lower. Therefore, when the price of the share rises in the future, the shareholders will get higher dividend if invested for the long term and will have time to recover losses.

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I. - The ordinary shares has reduced in price and the journal entries will record capital reduction.

- Internal reconstruction

ii. - Yes, they are having losses.

- Yes, they have to record in the journal entries.

iii. - It increases the number of common stock being traded in the market.

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i. It is an internal reconstruction because it involves reducing the par value of ordinary shares and preference shares.
ii. The shareholders are having losses in their investment when the share price is reduced. We have to record it in the journal entries, by debiting the ordinary shares and crediting to capital reduction account, to eliminate a deficit on the company’s profit and losses account.
iii. When the share price has been reduced, company has to sell more shares of stock to raise the same amount of proceeds. It means that the shareholders can buy more stock with a lower price. Shareholders can gain more when the share price increase back.