QUESTION 2 On 1 June, 2021, Fairchurch contracted to supply some equipment to a new customer, Coronet Metric Ltd. ("Coronet"). Delivery was made to Coronet on 5 June, 2021 and an invoice was submitted at the same time for payment of the price of 35,000 (inc. VAT) within 14 days of delivery. Whilst Coronet has not disputed the debt, it has so far paid only 5,000 to Fairchurch and it is not showing any signs of settling the balance of the debt soon. Fairchurch has contacted your firm for advice. Raquel Garcia believes Coronet is currently suffering severe financial problems. Document A is a balance sheet for Coronet as at 30 June, 2021. The following additional information is also relevant: (I) The freehold premises were last formally valued in July 2017, and this is the value recorded in Document A. However, as at today's date, the premises are in fact worth approximately 1,300,000. (II) In a liquidation at any time in the foreseeable future, the stock would realise only 50% of the value shown in Document A. (III) One of Coronet's largest customers has just gone into insolvent liquidation owing Coronet 125,000, with little prospect of its unsecured creditors (including Coronet) receiving payment of their debts. (IV) So far, none of Coronet's creditors has served statutory demands or commenced court proceedings in relation to debts which are already due for payment. For the purposes of this question, you can assume that the information in Document A remains correct for all items, other than as referred to in (I) - (III) above. (a) ?Using the above information and the information in Document A, explain whether Fairchurch could petition for a compulsory winding-up of Coronet on the basis of the "balance sheet test" of insolvency. (b) ?Assume for the purposes only of this part (b) that Brendan Galbraith Associates successfully petition for the compulsory winding-up of Coronet. On the basis that all the information at (I) - (III) above is correct, explain (with calculations) how much Fairchurch will receive of the debt owed to it if the costs of the liquidation amount to 25,000.

DOCUMENT A (For use in Question 2) Coronet Metric Ltd Balance Sheet as at 30 June 2021 E E E Fixed Assets Freehold premises 1,485,000 Current Assets Stock 158.000 Debtors 227,000 Cash 46.000 431,000 Creditors (amounts falling due within one year) Trade (115,000) Salaries (40 employees in total)" (32,000) Interest on Northeastern Bank plc loan ** (59,000) (206,000) Net Current Assets / (Liabilities) 225.000 Total Assets less Current Liabilities 1,710,000 Creditors (amounts falling due after one year) Northeastern Bank plc ** (1,243,000) Brendan Galbraith Associates** * (200,000) Net Assets / (Liabilities) 267,000 Capital and Reserves Called up share capital 80,000 Profit and loss reserves 187,000 Shareholders' funds 267,000 * Each employee is owed the statutory maximum figure. ** Secured by fixed charge over the premises. *** Unsecured loan.21:34 1 4G "pu-central-1-prod-fleet01-xythos.content.blackboardcdn.com QUESTION 2 On 1 June, 2021, Fairchurch contracted to supply some equipment to a new customer, Coronet Metric Ltd. ("Coronet"). Delivery was made to Coronet on 5 June, 2021 and an invoice was submitted at the same time for payment of the price of $35,000 (inc. VAT) within 14 days of delivery. Whilst Coronet has not disputed the debt, it has so far paid only $5,000 to Fairchurch and it is not showing any signs of settling the balance of the debt soon. Fairchurch has contacted your firm for advice. Raquel Garcia believes Coronet is currently suffering severe financial problems. Document A is a balance sheet for Coronet as at 30 June, 2021. The following additional information is also relevant: " The freehold premises were last formally valued in July 2017, and this is the value recorded in Document A. However, as at today's date, the premises are in fact worth approximately $1,300,000. In a liquidation at any time in the foreseeable future. the stock would realise only 50% of the value shown in Document A. (lly One of Coronet's largest customers has just gone into insolvent liquidation owing Coronet $125,000, with little prospect of its unsecured creditors (including Coronet) receiving payment of their debts. ( So far, none of Coronet's creditors has served statutory demands or commenced court proceedings in relation to debts which are already due for payment. For the purposes of this question, you can assume that the information in Document A remains correct for all items, other than as referred to in (1) - (III) above. (a) Using the above information and the information in Document A, explain whether Fairchurch could petition for a compulsory winding-up of Coronet on the basis of the "balance sheet test" of insolvency. (b) Assume for the purposes only of this part (b) that Brendan Galbraith Associates successfully petition for the compulsory winding-up of Coronet. On the basis that all the information at (1) - (Ill) above is correct, explain (with calculations) how much Fairchurch will receive of the debt owed to it if the costs of the liquidation amount to $25,000