Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Plato Pty Ltd was a successful family business that gained its shareholder's approval to sell its operations to Socrates Lid three months ago. In accordance

image text in transcribedimage text in transcribed
Plato Pty Ltd was a successful family business that gained its shareholder's approval to sell its operations to Socrates Lid three months ago. In accordance with the business combination agreement, Plato Lid transferred all of its identifiable net assets and its goodwill to Socrates Lid. In return, Socrates Lid made a $10,000,000 cash payment to Plato Pty Ltd. Plato Pty Ltd then initiated a voluntary liquidation to return the realised value of its paid-up capital, its accumulated profits, its goodwill, etc. to its members. The purchase consideration paid by Socrates Lid was more than sufficient to cover Plato Pty Ltd's outstanding debts. The latter company's directors made a declaration of solvency to their creditors. Plato Pty Ltd's liquidation has proceeded under the control of its members. Plato Pty Ltd's liquidator has now paid all of all the costs of its liquidation and all of its creditors. She has $8,000,000 on hand to distribute to Plato Pty Ltd's contributories. Details of Plato Pty Ltd's paid-up capital are as follows: Preference shares: 750,000 shares issued for $1, fully paid S 750,000 Ordinary shares: 500,000 shares issued for $2, paid to $1.70 850,000 A Ordinary shares: 1,000,000 shares issued for $5, paid to $1.25 1,250,000 B Ordinary shares: 500,000 shares issued for $10 paid to $2.50 1,250,000 Additional information (a) Plato Pty Ltd's constitution provides for the following: (i) Preference shareholders receive preferential treatment as to dividends and the return of paid-up capital. The constitution does not offer preference shareholders any other privileges. (ii) Ordinary shareholders, A Ordinary shareholders and B Ordinary shareholders rank equally (after preference shareholders) regarding the return of capital based on the number of shares held. (b) Arrears of preference dividends equal $75,000. (c) Any calls necessary to adjust the rights of contributories are recoverable.Required How much of the $8,000,000 available will each class of shareholders receive? Show clearly any workings in relation to the final distribution to shareholders (25 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Financial Accounting

Authors: Fred Phillips, Robert Libby, Patricia A Libby

3rd Edition

0073527106, 9780073527109

More Books

Students also viewed these Accounting questions