Busn3047 Company Accounting Principles Of Assessment Answers
- Prepare journal entries to wind up the affairs of Busto Ltd.
- Prepare the Liquidation account, the Cash account and the Shareholders’ Distribution account, clearly showing the share of cash for each class of shares.
The bank took possession of the land and buildings and sold them for$240,000. After settlement of the debt, including $4,000 of unrecorded interest, any excess funds were paid to the liquidator.
(b) The sale proceeds of assets realised the following amounts in cash:
(c) The liquidation expenses amounted to $2,300. The liquidator’s remuneration was $4,000. The wages payable account includes wages owing to all employees, of which $3,000 is payable to the son of one of the company’s directors.
(d) Payments made by liquidator after negotiation with creditors: Accounts payable $ 95 000
(e) Share capital consisted of:
(f) Calls on shares: The liquidator called up the uncalled balance on ‘B’ ordinary shares and ‘C’ ordinary shares. Holders of 10 000 ‘C’ ordinary shares and 10 000 ‘B’ ordinary shares failed to pay the call and these shares were subsequently forfeited.
Answer:
|
Particular |
|
Valuation |
Estimated Realisable Value |
|
1. Assets not specifically charged |
|
|
|
|
Plant & Equipment |
|
98400-16800 =81600 |
56000 |
|
Bills Receivable |
|
57600 |
33600 |
|
Cash at Bank |
|
1200 |
1200 |
|
Stock |
|
146400 |
112800 |
|
Other Assets: Accounts Receivable |
|
69600 |
42000 |
|
|
|
356400 |
245600 |
|
2. Assets subject to specific charge |
|
|
|
|
Land & Building |
|
|
95000 |
|
Land |
37200 |
|
|
|
Building (Book Value - Depreciation) |
108000-36000 =72000 |
|
|
|
Total |
109200 |
|
|
|
Less: Amount Owing ($81600+2400) (Gitman, Juchau and Flanagan, 2015) |
(84000) |
27400 |
11000 (95000-84000) |
|
Total Assets |
|
|
256600 |
|
Total estimated realisable value |
|
|
256600 |
|
3. Less preferential creditors entitled to priority over holders of debentures under a floating charge |
|
|
|
|
Salaries and wages |
|
|
$1680 |
|
|
|
|
$254920 |
|
4. Less amounts owing and secured by debenture or floating charge over company assets (Mills and Woodford, 2015) |
|
|
|
|
Debentures |
|
$34560+$1440 |
$36000 |
|
|
|
|
$218920 |
|
5. Less preferential creditors |
|
|
- |
|
Estimated amount available to creditors |
|
|
$218920 |
|
6. Creditors (unsecured) |
|
|
|
|
Trade creditors |
108000+3600 |
$111600 |
|
|
Income tax payable |
4800 |
$4800 |
$116400 |
|
Balance available to shareholders |
|
|
$102520 |
|
Payment of dividend in arrear |
|
|
$14400 |
|
Amount to be distributed among shareholders |
|
|
$88120 |
|
Share capital issued |
|
|
|
|
Preference share capital |
$60000 |
|
|
|
Share capital A |
$108000 |
|
|
|
Share capital B |
$60000 |
|
$228000 |
|
Share capital paid |
|
|
|
|
Preference share capital |
$60000 |
|
|
|
Share capital A |
$108000 |
|
|
|
Share capital B |
$36000 |
|
$204000 |
Journal entries for Wind up of Remi Ltd
(Amount in $)
|
Liquidation A/c Dr 372000 |
|
Accounts Receivable Cr. 69600 |
|
Bills Receivable Cr. 57600 |
|
Inventory Cr. 146400 |
|
Plant & Equipment Cr. 98400 |
|
(Assets accounts transferred to liquidation account) |
|
Accumulated Depreciation (Plant & Machinery) 16800 |
|
Liquidation Cr. 16800 |
|
(Contra-assets transferred to Liquidation Account) |
|
Cash A/c Dr. 2412000 |
|
Liquidation A/c Cr. 2412000 |
|
(Assets sold for cash except land and building at the amount Realised at completion of winding up) (Note 1) |
|
Liquidation A/c Dr. 9120 |
|
Accounts Payable Cr. 3600 |
|
Salary and Wages Cr. 1680 |
|
Accrued Interest on mortgage Cr. 2400 |
|
Accrued Interest on Debenture Cr. 1440 |
|
(Unrecorded liabilities recorded in liquidation account) |
|
Accounts Payable A/c Dr. 2400 |
|
Liquidation A/c Cr. 2400 |
|
(Discount allowed by creditors) |
|
Mortgage Loan A/c Dr 81600 |
|
Accrued Interest A/c Dr. 2400 |
|
Cash A/c Dr 6000 (90000-84000) |
|
Accumulated depreciation on Building Dr. 36000 |
|
Liquidation A/c Cr. ( Loss on sale) 19200 |
|
Land & Building Cr. 145200 (37200+108000 |
|
(Sale of land & Building by mortgage loan and return of funds to liquidator (Clarke and Dean, 2014)) (note 1) |
|
Calls in arrear A/c Dr 16000 |
|
Share Capital A/c Cr. 16000 |
|
(Call made on B ordinary shares) |
|
Cash A/c Dr. 16000 |
|
Call in arrear A/c Cr. 16000 |
|
(Being full cash received on calls in arrear) |
|
Liquidation Expenses A/c Dr. 960 |
|
Debenture A/c Dr. 34650 |
|
Accrued Interest on debenture A/c Dr. 1440 |
|
Arrear on dividend 14400 |
|
Liquidation Remuneration A/c Dr. 4800 |
|
Salary & Wages Payable A/c Dr 1680 |
|
Accounts Payable A/c Dr 105600 |
|
Income Tax Payable A/c Dr 4800 |
|
Cash A/c Cr. 1 68330 |
|
(Liabilities paid in priority order) |
|
Preference Shares 60000 |
|
Share Capital A Ordinary Shares A/c Dr 108000 |
|
Share Capital B 58000 |
|
Share Holder Distribution A/c 226000 |
|
(Transfer share capital account to shareholder’s account) |
|
Liquidation A/c Dr. 26640 |
|
Retained Earnings Ac Cr. 14640 |
|
General Reserve A/c Cr. 12000 |
|
(Transfer of retain earnings to Liquidation account) (Note 2) |
|
Shareholders Distribution A/c Dr 159840 |
|
Liquidation A/c Cr 159840 |
|
(Being deficiency transferred to liquidation A/c) |
|
Shareholders Distribution A/c Dr 99300 |
|
Cash A/c Cr. 99300 |
|
(Final payment to shareholders as per schedule) (Note 3) |
Note 1
Actual amount realised at sale of assets:
Inventories $112800
Plant and Equipment $52800
Bills receivable $33600
Accounts Receivable $42000
Total $241200
Note2
Liquidation
|
Particular |
Amount in $ |
Particular |
Amount in $ |
|
Plant & Equipment (net of depreciation) |
81600 |
Cash (sale of assets) |
241200 |
|
Bills Receivable |
57600 |
Balance c/d (loss on liquidation) |
|
|
Accounts Receivable |
69600 |
|
133200 |
|
Inventory |
146400 |
|
|
|
Loss on sale of Land & Building |
19200 |
|
|
|
|
374400 |
|
374400 |
|
Balance b/d |
133200 |
|
|
|
General Reserve |
12000 |
|
|
|
Retained Earnings |
14640 |
Balance c/d (deficiency) |
159840 |
|
|
159840 |
|
159840 |
Note 3
It has been assumed that amount has been returned to liquidator after reducing unrecorded accrued interest on mortgage loan as well as principal amount of mortgage loan (Dagwell, Wines and Lambert, 2015).
Final distribution to shareholders
|
PartiCULAR |
No. of Shares |
Paid |
Notional Call |
Notional Refund (.400 cents) |
Actual Refund |
Defeceincy Share |
|
12 % Preference Share |
50000 |
60000 |
|
20000 |
20000 |
40000 |
|
A Ordinary SHares |
90000 |
108000 |
|
36000 |
36000 |
54000 |
|
B Ordinary Shares |
100000 |
60000 |
40000 |
40070 |
19930 |
79930 |
|
Total |
240000 |
228000 |
40000 |
|
|
|
|
Balance of Cash b/d |
80070 |
|
|
|
|
|
|
Calls in arrear |
16000 |
|
|
|
|
|
|
Total |
96070 |
|
|
|
|
|
|
Cash Available |
|
|
96070 |
|
|
|
|
TOTAL DEFECIENCY |
159840 |
|
|
|
|
|
|
Total Notional Cash per share |
=96070/240000 =.400 cents |
|
|
|
|
|
Liquidation account
|
Particular |
Amount in $ |
Particular |
Amount in $ |
|
Plant & Equipment (net of depreciation) |
81600 |
Cash (sale of assets) |
241200 |
|
Bills Receivable |
57600 |
Balance c/d (loss on liquidation) |
|
|
Accounts Receivable |
69600 |
|
133200 |
|
Inventory |
146400 |
|
|
|
Loss on sale of Land & Building |
19200 |
|
|
|
|
374400 |
|
374400 |
|
Balance b/d |
133200 |
|
|
|
General Reserve |
12000 |
|
|
|
Retained Earnings |
14640 |
Balance c/d (deficiency) |
159840 |
|
|
159840 |
|
159840 |
Cash Statement
|
Particular |
Amount in $ |
Particular |
Amount in $ |
|
|
|
|
|
|
Cash (sale of assets) |
241200 |
Liquidation Expenses A/c |
960 |
|
Cash Balance Transferred |
1200 |
Debenture A/c |
34650 |
|
Balance from secured creditor |
6000 |
Accrued Interest on debenture A/c |
1440 |
|
|
|
Arrear on dividend |
14400 |
|
|
|
Liquidation Remuneration A/c |
4800 |
|
|
|
Salary & Wages Payable A/c |
1680 |
|
|
|
Accounts Payable A/c |
105600 |
|
|
|
Income Tax Payable A/c |
4800 |
|
|
|
Balance Carried down |
80070 |
References
Clarke, F. and Dean, G., 2014. Corporate Collapse: Regulatory, Accounting and Ethical Failure. In Accounting and Regulation (pp. 9-29). Springer New York.
Dagwell, R., Wines, G. and Lambert, C., 2015. Corporate accounting in Australia. Pearson Higher Education AU.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Mills, A. and Woodford, W., 2015. Company Accounting. Pearson Higher Education AU.
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