Page 39 - Ebook Financial Accounting 3
P. 39
ANSWER:
Item Dr Cr
Bank RM62,500,000
Ordinary Share Capital RM62,500,000
c) Conversion of Preference Shares
An entity may issue convertible preference shares with the option for the holders of these shares
to convert them into ordinary shares. These terms of the conversion such as the conversion rate,
time period of conversion, whether at the option of the company or shareholder.
Example 2.6:
An extract from the statement of financial position of Be-Good Bhd as at 1 January 2020 is
given below.
RM’000
Equity
100,000 Ordinary Shares, fully paid up 100,000
5% 20,000 Convertible Preference Shares 20,000
Retained earnings 35,000
Four preference shares could be converted into three ordinary shares and on 1 January 2020,
all the preference shares were converted into ordinary shares.
Required:
Prepare the journal entries for the conversion and an extract from the statement of financial
position immediately after the conversion.
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