- 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.

 

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. 

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.

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.

                   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.

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.

 

 

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. 

 

     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.

 

 

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.

 

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

 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. 

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. 

 

      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.

 

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.