Sale of assets, final distribution to shareholders    LO7, 8, 9 As a result of a court order, Spider Ltd went into liquidation on 30 June 2020. A statement of financial position prepared on that date was as follows. SPIDER LTD Statement of financial position as at 30 June 2020 Equity Share capital: 80 000 preference shares, issued at $2 and paid to $1 $ 80 000 136 000 ‘A’ ordinary shares, issued for $2, called to $1.50 204 000 100 000 ‘B’ ordinary shares, issued for $1, called to 75c 75 000 359 000 Less: Calls in arrears: 24 000 ‘A’ ordinary shares $ (6 000) 2400 ‘B’ ordinary shares (600) (6 600) 352 400 Calls in advance: 4000 ‘A’ ordinary shares at 50c 2 000 General reserve 51 600 Retained earnings (accumulated losses) (26 000) Total equity $380 000 Current assets Cash 1 800 Accounts receivable 111 000 Allowance for doubtful debts (2 000) 109 000 Inventories 39 200 Total current assets 150 000 Non‐current assets Land 140 000 Buildings 432 000 Less: Accumulated depreciation — buildings (326 000) 106 000 Plant and equipment 210 000 Less: Accumulated depreciation — plant and equipment (160 000) 50 000 Goodwill 44 000 Less: Accumulated impairment losses — goodwill (8 000) 36 000 Total non‐current assets 332 000 Total assets 482 000 Current liabilities Loan (unsecured) 12 000 Creditors and accruals 50 000 Total current liabilities 62 000 Non‐current liabilities Mortgage (secured on land and buildings) 40 000 Total non‐current liabilities 40 000 Total liabilities 102 000 Net assets $380 000 Additional information

(a) The company’s constitution was silent as to return of capital in the event of a winding up.

(b) The mortgage holder took possession of the land and buildings, sold them for $286 000, paid off the mortgage plus interest owing of $1600 and refunded the difference to the liquidator.

(c) The liquidator was able to realise the following amounts for the assets. Plant and equipment $ 49 000 Inventories 34 000 Accounts receivable 107 000 $190 000

(d) The ledger account ‘Creditors and accruals’ comprised the following. Workers compensation owing to employee $10 000 Company income tax owing 20 000 Annual leave owing to a director’s son 4 000 Trade creditors 16 000 $50 000

(e) Additional liabilities accepted by the liquidator and not yet recorded were as follows. Interest accrued on mortgage $ 1 600 Salaries owing to two directors ($30 000 + $32 000) 62 000 Retrenchment payments owing to four employees 40 000 Wages owing to 14 employees 270 000 $373 600

(f) All calls in arrears were received by the liquidator, except from 4000 ‘A’ ordinary shares. These shares were forfeited. (g) Calls in advance were not paid back before the final distribution by the liquidator. Uncalled capital (where required to be called up) on final distribution proved to be recoverable. (h) Liquidation expenses amounted to $7600. Required 1. Prepare the journal entry in Spider Ltd’s records to record the sale by the mortgage holder of the land and buildings, and the receipt of any net cash from the mortgage holder. 2. Prepare the liquidation account. 3. Show all workings for calculation of the final distribution of deficiency or surplus to shareholders. 4. Prepare the liquidator’s receipts and payments account, showing clearly the order of priority of payment of liabilities.