Other information: 1. There is an arrears of preference dividend of $13,600. The constitution gives preference shareholders
Question:
Other information:
1. There is an arrears of preference dividend of $13,600. The constitution gives preference shareholders priority of payment of arrears of preference dividends. However, all shares rank equally regarding return of capital based on the number of shares held.
2. The liquidator discovered that:
a. $3,800 worth of Accounts Payable had not been recorded.
b. In total, the creditors were willing to give a discount of $2,500 upon settlement of the Accounts Payable.
c. Salaries and wages totalling $2,300 had not been recorded.
d. Accrued interest of $2,000 on the mortgage and $1,200 on the debentures had not been recorded.
Required
1. Prepare a summary of affairs as at 30 June 2022 for Life Ltd. (Hint: you can refer to the example of Fern Ltd on page 1249/50 of the textbook) (10 marks).
2. Prepare all the relevant journal entries in Life Ltd to wind up the company. Narrations are required. Clearly show the order of priority of payment to the creditors. (40 marks).
3. Show clearly any workings in relation to the final distribution to shareholders (i.e. prepare a shareholder’s distribution table) (10 marks).
4. Prepare a properly balanced Liquidation account, Shareholder’s distribution account and Liquidator’s cash account. Show all the relevant detail in the account entries
Financial Management for Public Health and Not for Profit Organizations
ISBN: 978-0132805667
4th edition
Authors: Steven A. Finkler, Thad Calabrese