Sheet1a) total value of assetb) total loss to write offas going concernput into liquidationland and building670 000670 000retained losses (2 075 000)plant and machinery330 000280 000preference share dividend (2year)(96 000)other tangible asset142 000128 000land and building590 000receivable account57 60042 500plant and machinery (330-360)(30 000)inventories60 00052 000other tangible asset(126 000)cash in hand15 00015 000receivable account(14 400)1 274 6001 187 500preliminary expense(30 000)inventories(15 000)total asset as going concer is higher than total asset available.cost of construction(21 800)if the company put iinto liquidation the asset distributedd as follows :patent and trademark(200 000)goodwill(170 000)total asset availableless:total accumulated loss(2 188 200)debenture1 274 600secured account payable(700 000)unsecured account payable(120 000)c) reduction in claimedpreference share(120 000)amount reduction% amountdeficit to PSH/OSH(800 000)* (800-466)/800 = 41.75%p/s dividendn in arrears96 000100%96 000(466 000)bank overdraft480 000--secured creditor120 000--if the company is liquidated, the asset are not sufficient to pay off the shareholder.debenture700 000--the preference shareholder may expected to agree on reconstruction scheme.unsecured creditor120 000100%120 000Since asset on liquidation only cover 41.75% of total claim.PSH800 00058%464 000OSH1 500 00098%1 470 000a capital reconstruction scheme is more for the benefit of all the parties.share premium40 000100%40 0002 190 000total losses 2 188 200capital reserve1 800

Sheet2d) capital reconstruction proposale)statement of financial position after reconstruction1. the ordinary shares were to be written off by 98% (RM0.98) .and then to be consolidated back to original par value.2. the preference shares are to be written off by 58% and to be replaced with 30 000 o/s171 800 o/s of RM1 (30 + 21.8 + 120)171 800of RM1 each. And p/s dividend in arrears to be write off.336 000 9% p/s of RM1336 000capital reserve1 8003. the goodwill and accumulated losses 100% are to be written off.CURRENT LIABILITIES4. the cost of construction amounteed to RM 21 800 debenture interest40 000secured creditor120 0005. the following cost were revalued :bank overdraft480 000reconstruction cost21 800land and building1 500 000accrued expense25 000plant and machinery330 000other tangible asset142 000NON CURRENT LIABILITIESreceivable account57 600debenture700 000inventories60 000long term loan350 000

6. the preference share dividend will be increase to9%2 246 4007.the debenture interest and the debit balance of profit and loss account is to write offCURRENT ASSETinventories60 0008. the company had issued 141 800 unit ordinary shares of RM1 each to cover account receivable57 600the reconstruction cost and claimcash in hand (15 + 21.8 + 120)NON CURRENT ASSETland and building1 500 000plant and machinery330 000other tangible asset142 000

2 246 400

Sheet3e) gearing ratiocapital employed before after

OSC1 500 000171 800PSC800 000336 000profit and loss (debit)(2 075 000)capital reserve1 800share premium40 00010 % debenture700 000700 000Long term loan350 000350 000capital employed 1 315 0001 559 600

Gearing ratio 1 150 000686 0001 315 0001 559 6000.870.44

as a result of the reconstruction scheme, the level of gearing of the company has significantly decrease from 87% to 44%. The company has now become less risky compare before the time of reconstruction. However, the company should improve itsperformance in the future in order to reward their shareholders who may made a large sacrifice for the survival of the company.