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  1. Prepare journal entries to wind up the affairs of Busto Ltd.
  2. 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.

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

(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).

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

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

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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My Assignment Help. (2021). Journal Entries For Wind Up Of Remi Ltd - Valuation, Creditors, Assets, Essay.. Retrieved from https://myassignmenthelp.com/free-samples/busn3047-company-accounting/corporate-accounting-in-australia.html.

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[Accessed 29 February 2024].

My Assignment Help. 'Journal Entries For Wind Up Of Remi Ltd - Valuation, Creditors, Assets, Essay.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/busn3047-company-accounting/corporate-accounting-in-australia.html> accessed 29 February 2024.

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