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Question

Following evidence of maladministration of the company, creditors of C Ltd lodged a petition for it to be wound

up. A court order to that effect was issued on 28th January 2012. The company's trial balance at that date and other relevant information is presented below.


$ $

8% Mortgage on land 160 000

12% notes (secured by floating charge on assets other than land 130 000

Accounts payable   76 000

Accounts receivable 132 000

Accrued expenses  62 000

Accumulated Depreciation:

Buildings  21 500

Plant and machinery 124 000

Bank Overdraft Secured    2 000

Buildings 200 000

Estimated uncollectible debts    4 500

Inventory   96 000

Investments (unquoted)   50 000

Land   80 000

Paid -Up Capital 400 000

Patents   79 000

Plant and machinery 320 000

Reserves   20 000

Retained Profits 43 000  

$1 000 000 $1 000 000



You are provided with the following additional information:

i)                   The provisions as to priority for payment on liquidation as set out in Fiji's 1983 Companies act apply.

ii)                 Accrued expenses are:

                                                                                                                  $

Wages and salaries (30 employees each owed $700)                              21000

Payroll Tax                                                                                               18000

Interest on Mortgage                                                                               10000

Interest on Notes                                                                                    13000

                                                                                                                 62000

 

iii)               In March 2012 the liquidator received and accepted a $36000 income tax notice. Closing accounts assuming liquidation costs amount to $25000 (all relating to conserving and realizing company property) and fees are $31000.

iv)               The assets were expected to and do realize, in a going concern sale:

$

                       Land                                                               200 000

                       Buildings                                                        390 000

                       Plant and Machinery                                       85 000

                       Inventory                                                        90 000

Accounts Receivable                                      66 000

Investments                                                     34 000

Patents                                                             42 000

                                                                      907 000

Required:

a)     Prepare Liquidation account, liquidation cash account and shareholders distribution account to report the above and close off the books of C Ltd.

(15 marks)

b)     You are now informed that the liquidator fails to sell the business as a going concern and assets only realize:

                                                                                        $

Land                                                                100 000

Buildings                                                         200 000

Plant and Machinery                                         35 000

Inventory                                                           10 000

Accounts Receivable                                         43 000

Investments                                                        12 000

Patents                                                                     800  

                                                                         400 800    


Determine the sum to be paid to each of the employees.                

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