Order of payment of debts, journal entries for liquidation surplus   LO7, 9 Glowworm Ltd went into voluntary liquidation on 30 June 2021. The statement of financial position prepared on that date is as follows. GLOWWORM LTD Statement of financial position as at 30 June 2021 Current assets Cash $ 16 000 Inventories 63 000 Accounts receivable $ 36 100 Less: Allowance for doubtful debts (4 100) 32 000 Non‐current assets Plant and equipment 168 000 Less: Accumulated depreciation — plant and equipment (35 200) 132 800 Land 90 600 Shares in listed companies 52 000 Total assets 386 400 Current liabilities Accounts payable 43 200 Other payables 16 100 Non‐current liabilities Mortgage on land 85 000 Debentures 150 000 Total liabilities 294 300 Net assets $ 92 100 Equity Share capital: Preference: 20 000 shares, issued at $1, fully paid 20 000 Ordinary ‘A’ 25 000 shares, issued at $1, fully paid 25 000 Ordinary ‘B’ 20 000 shares, issued at $1, called to 60c 12 000 57 000 General reserve 7 000 Retained earnings 28 100 Total equity $ 92 100 Additional information • Liquidator’s remuneration and expenses amounted to $1800. • Other payables of $16 100 comprised the following. Wages payable — employees $ 6 000 Wages payable — managing director 2 800 Annual leave payable — employees 4 400 Income tax payable 2 000 Telephone bill payable 900 • The debentures are secured by a circulating security interest over the company’s assets. • The mortgage holder took possession of the land and sold it for $81 700. • Other assets realised the following amounts. Inventories $ 54 000 Accounts receivable 26 000 Plant and equipment 134 000 Shares in listed companies 61 000 • Uncalled capital (if required to be called up) is recoverable. • Preference shareholders are preferential as to dividends and return of capital. The constitution does not provide any further rights for preference shareholders. • In relation to return of capital, ordinary ‘A’ shareholders and ordinary ‘B’ shareholders rank equally after preference shareholders. Required 1. List the debts paid by the liquidator in their order of priority of payment. 2. Prepare journal entries to wind up Glowworm Ltd.