Accounting

AF 203 CORPORATE ACCOUNTING
Workshop 7

Question 1

Stricken Ltd went into liquidation on 1 April 20X6 and presents the following trial balance.

Stricken Ltd
Trial Balance as at 1 April 20X6
$ $
Accounts receivable 75 000
Inventory 196 000
Motor vehicles 16 000
Plant and equipment 92 000
Land and buildings 80 000
Preliminary expenses 3 000
Accumulated losses (debit) 200 000
Bank 58 000
Trade creditors 69 000
Accrued expenses 2 000
Unsecured notes 100 000
Share capital ($1 shares)
– Preference (fully paid) 150 000
– Ordinary (fully paid) 250 000
Accumulated depreciation ??“ motor vehicles 5 000
– plant/equipment ______ 28 000
$662 000 $662 000
====== ======
Additional information:
(i) Proceeds from sale of assets:
Accounts receivable $74 000
Inventory 160 000
Motor vehicles 9 000
Plant & equipment 52 000
Land & buildings 100 000

(ii) Payments:
Interest on overdraft $900
Trade creditors 67 800
Accrued expenses 2 500
Unsecured notes & interest thereon 102 200
Liquidator??™s expenses & remuneration 5 500

(iii) Rights of shareholders: Preference shareholders were preferential as to return of capital.

Required
Prepare the Cash account, the Liquidation account and the Shareholders??™ Distribution account.

Question 2

On 1 July 20X6, Downer Ltd went into voluntary liquidation and its assets and liabilities at that date were:
$
20 000 6% preference shares of $1. 20 000
40 000 ordinary shares of $1 each, 40 000
Paid-up capital 60 000
Less Accumulated losses 43 000
Shareholders??™ equity 17 000
Unsecured notes 10 000
Mortgage on property 15 000
Accounts payable 3 400
Other outstanding liabilities 1 600
$47 000
=====

Property 16 000
Plant and equipment 12 000
Cash at bank 300
Accounts receivable 8 500
Inventory 10 200
$47 000
=====

The outstanding liabilities comprised:
Sales tax 435
Wages 505
Income tax deducted from employees??™ wages and
Salaries not yet remitted 445
Income tax for year ended 20X4 (the last year in which
A profit was made) outstanding 215
$ 1 600

The company??™s constitution provided that in the event of liquidation, preference shares would be entitled to all arrears of preference dividends, whether earned, declared or not, up to 30 June immediately preceding the date on which liquidation commences.
This was the only reference made in the constitution to the rights of shareholders in the event of winding up. Dividends were in arrears for two years.
Assets realized the following amounts: property, $14700; plant and equipment, $10 000; accounts receivable, $6000; inventory, $8000.

Required
Prepare the Cash account, the Liquidation account and the Shareholders??™ Distribution account.

Question 3

Alistair Ltd went into liquidation on 1 July 20X6 and presents the following balance sheet.

Alistair Ltd
Balance Sheet as at 30 June 20X6

$ $ $
Assets
Current Assets
Accounts receivable 3 000 000
Inventory 500 500

Non-current assets
Land and buildings 5 120 000
Furniture and fittings 2 300 000
Less Accumulated depreciation 420 000 1 880 000 7 000 000
Total assets $10 500 000

Liabilities
Current liabilities
Accrued expenses 75 200
Overdraft 57 000
Accounts Payable 180 000 312 200

Non-current liabilities
Debentures 1 000 000
Total liabilities 1 312 000
Net assets 9 188 300
=======
Shareholders??™ equity
Share capital
1 000 000 preference shares of $1 each 1 000 000
8 000 000 ???A??? ordinary shares of $1 each 8 000 000
9 000 000
Asset revaluation reserve 2 000 000
Less Accumulated losses (1811 700) 188 300
$9188 300
=======
Additional information:

(i) Proceeds from the sale of assets and collections:

Accounts receivable $2 800 000
Inventory 450 000
Land & buildings 4 500 000
Furniture & fittings 1 223 000

(ii) Payments:

Interest on overdraft not recorded amounted to 1 800
Interest on debentures not recorded, amounted to 100 000
Liquidator??™s expenses and fees were 350 000

(iii) Preference shareholders were preferential as to the return of capital.

Required

(a) Prepare the Cash account, the Liquidation account and the Shareholders??™ Distribution account.

(b) How would the shareholders distribution varied, had preference shareholders not enjoyed preference with respect to the return of capital

Acknowledgement : these workshop exercise shave been adapted from material appearing in Gaffikin M. et al (2004) ???Corporate Accounting in Australia??? UNSW press.