As a result of a creditor's petition, a court order was issued for the liquidation of Investor Danger Ltd.

At a meeting of the creditors, debts were submitted and subsequently taken as proved by the liquidator.

They consisted of $240,000 in unsecured notes and debentures issued with a circulating security interest which totaled $525,000.

The land and buildings had been used as security to raise two mortgage loans. The first mortgage was for $198,000, which included the outstanding mortgage loan and accrued interest to the date of liquidation. The second subsequent mortgage was for $124,000.

The short-term creditors consisted of trade accounts payable, $192,000, and outstanding employee entitlements. These entitlements were made up of employees’ wages for the eight employees who were each owed two weeks' wages at $1,000 per week, a secretary’s salary also owed two weeks at $750 per week, their accrued holiday pay of $15,000, and outstanding sales commissions earned by the sales team totaling $8,000. PAYG installment tax of $1,900, GST of $4,780, and Fringe Benefits Tax of $4,800 were also outstanding.

The directors were owed fees of $12,000 and the managing director had a month’s salary unpaid of $17,000.

The liquidator incurred expenses of $12,000 and had a remuneration of $35,000. The liquidator took control of the assets and realised $1,332,808 from their sale, which included $298,000 from the sale of the land and buildings.

The share capital of the company comprised 120,000 fully paid $1 Ordinary shares.

Required:

Show the order of priority of payment of debts for Investor Danger Ltd and calculate the amount payable to each of the creditors.

Answer rating: 100% (QA)

ANS WER The order of priority of payment of debts for Investor Danger Ltd is a... View the full answer