Question $2$

Accounting for Liquidations

$25$ Marks

$($a$)$ On $1$ April $2021,$ Sinking Ltd is placed into liquidation. On this date the statement of

financial position had the following balances.

Shareholders' equity

Share capital

$200000$ shares issued at a price of $K1\mathrm{.}00.$ called

at $50t$

Less: Calls in arrears $(50000$ at $25$t$)$

Liabilities

Payables

Non $-$current assets

Land

Plant

Current assets

Receivables

Inventory

Cash

All assets realized $K75000.$ Calls in arrears were fully collected. Payables allowed

K$1250$ discount. Cost of liquidation were K $6250.$

Required:

Prepare the following:

Liquidation account

II$.$ Cash at bank account and

III. Shareholders' distribution account

$(8$ marks$)$

$(6$ marks$)$

$(3$ marks$)$

$($b$)$ The liquidator of Bankrupt Ltd provided the following information:

After the settlement of all the creditors and preferential payments there is a cash

balance of $K39560$ left to pay shareholders. Both shareholders are ranked equally.

Required:

Calculate share deficiency

$(2$ marks$)$

II$.$ Find the amount payable to each of the shareholders

$(6$ marks$)$