Reference no: EM132589681

Question 1: Here is the financial position of Bestow Pte Ltd which is experiencing financial problems

Net assets USD 2,000,000

Represented:

Equity shares USD1.00 per share- USD8,000,000

Accumulated losses (USD6,000,000)

USD2,000,000

The Company chooses to cancel shares that do not represent the value of the company's net assets. Which of the following statements is TRUE?

A. The company can cancel equity share capital from USD8,000,000 to USD2,000,000

B. The value of shares per unit can be reduced from USD1.00 to USD0.25

C. Journal entries are equity share debit of USD6,000,000 and accumulated loss credit of USD,6000,000.

D. All of the above answers.

Question 2: The company issued 1,500,000 units of equity at USD1.20 per full paid-up share a year ago. As the company has no plans to expand its business due to the economic downturn, the company has decided to repay the share capital to shareholders by USD0.50 per share to reduce the average equity cost by 10% in the future. Which of the following statements is WRONG?

A. The future cost savings of the equity is USD750,000.

B. Debit on equity share account USD750,000 and cash account credit USD750,000.

C. Debit equity account accounts of USD750,000 and capital deduction accounts credit of USD750,000.

D. The balance of equity shares after capital restructuring is 1,500,000 units.