Draft statement of financial position of Santos Ltd as at 15^th August, 2018 is as follows:

Total non-current assets                                                                                              60,000

Patents                                                                                                                             80,000

                                                                                                                                        140,000

Current assets

Inventory                                                                                            40,000

Receivables                                                                                         28,000

                                                                                                                                         68,000

Total assets                                                                                                                    208,000

GHS1 equity shares                                                                                                       60,000

Retained earnings                                                                                                        (30,000)

                                                                                                                                          30,000

Long term liabilities

4% fixed charge debentures                                                               70,000

5% floating charge debentures                                                           50,000

6% preference shares                                                                          20,000

                                                                                                                                    140,000

                                                                                                                                    170,000

Current liabilities                                                        

Payables                                                                                              30,000

Overdraft                                                                                              8,000

                                                                                                                                    38,000

                                                                                                                                    208,000

You are given the following information:

1. The 4% debentures are secured by a fixed charge on the building included within Total Non-Current Assets at a carrying value of GHS50,000. The debenture is due for repayment in 18 months’ time.
2. 
   
3. The 5% debentures were issued 3 years before the 4% fixed charge was created and are secured by a floating charge over the inventory and receivables. The debt is repayable in 5 years’ time
4. 
   
5. Included within payables are GHS8,000 arrears of wages to be paid in the scheme and GHS2,400 other preferential creditors but not yet paid.
6. the scheme devised by the directors is as follows:
   1. 
      
   2. the building is to be transferred to the fixed charge debenture holder in full settlement and is then to be leased back under a finance lease at the fair value of GHS70,000; the lease terms have an implicit rate of interest of 4.5% per annum and involve installments of GHS6,000 until the full amount due has been paid
   3. 
      
   4. the entity has received an offer of GHS25,000 for the patents and the directors propose to impair them to that value
   5. inventory is to be re-valued to GHS36,000 and receivables to GHS25,000
   6. the GHS1 equity shares are to be cancelled and replaced by 500,000 10 pesewas equity shares, credited as to 1 pesewa each
   7. the directors are then to make a call on the equity shareholders for the remaining 9 pesewas per share payable immediately
   8. the 5% floating charge debentures are to be paid 50% of the amount due to them in cash immediately
   9. the remaining amount due to the floating charge debenture holders is to be cancelled and replaced by GHS27,000 6% floating charge debentures secured on the current assets, repayable in 10 years’ time
   10. the 6% preference shareholders are to forego two years outstanding dividends      (not recognized in the statement of financial position), the preference shares are to be cancelled and replaced with 100,000 equity shares of 10 pesewas each credited as fully paid
   11. the trade payables have agreed to be settled in full by a payment of 40 pesewas in the GHS1

Required:

Prepare the revised statement of financial position for Santos Ltd on the assumption that the directors’ scheme is given approval by the court and by all those stakeholders who are affected. [25 MARKS]

Answer rating: 100% (QA)

Prepare revised statement of financial statement Total noncurrent assets Curr... View the full answer