Journal entries and ledger accounts for liquidation   LO9 The trial balance of Locust Ltd on 1 September 2021, the date on which the court ordered that the company be wound up, is presented below. LOCUST LTD Trial balance as at 1 September 2021 Debit Credit Bank overdraft (secured over land and buildings) $114 000 Accounts payable 91 000 Accrued expenses 2 000 Unsecured notes 150 000 Debentures (secured by a circulating security interest over the company’s assets) 200 000 Share capital: 7% preference issued at $1 50 000 ‘A’ ordinary issued at $1 200 000 ‘B’ ordinary issued at $1 40 000 ‘C’ ordinary issued at $1 20 000 Allowance for doubtful debts 1 000 Accumulated depreciation — vehicles 17 000 Accumulated depreciation — plant and equipment 40 000 Cash $ 100 Accounts receivable 97 000 Inventories 146 400 Shares in Bee Pty Ltd 17 500 Vehicles 29 000 Plant and equipment 181 000 Land and buildings (net) 250 000 Goodwill 24 000 Retained earnings 180 000 $925 000 $925 000 Additional information

(a) Share capital consisted of the following. 50 000 7% preference shares fully paid 200 000 ‘A’ ordinary shares fully paid 100 000 ‘B’ ordinary shares paid to 40c 100 000 ‘C’ ordinary shares paid to 20c The constitution provided that preference shareholders were preferential as to return of capital in a winding up, and ‘C’ ordinary shareholders were deferred as to return of capital until all other classes of shares had been paid in full.

(b) Proceeds from sale of assets (the bank agreed to allow the liquidator to sell the land and buildings) were as follows. Accounts receivable $ 71 000 Inventories 100 000 Shares in Bee Pty Ltd 10 000 Vehicles 10 000 Plant and equipment 116 000 Land and buildings 240 000

(c) 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.

(d) Payments made by liquidator after negotiation with creditors were as follows. Liquidation expenses $ 2 100 Liquidator’s remuneration 4 000 Bank overdraft and interest 116 000 Accounts payable 89 000 Accrued expenses 2 200 Unsecured notes and interest 154 500 Debentures and interest 206 000 Required 1. Prepare journal entries to wind up the affairs of Locust Ltd. 2. Prepare the liquidation account, the liquidator’s receipts and payments account and the shareholders’ distribution account, clearly showing the share of cash for each class of shares.