The trial balance of Mr Lunch Ltd on 9th August 2019, the date on which the court ordered that the company be wound up, is presented below. MR LUNCH LTD Trial Balance as at 9 August 2019 Credit Cash Accounts receivable Inventory Debit 1 800 69 000 29 200 36 000 140 000 432 000 Goodwill Land 326 000 210 000 Buildings Accumulated Depreciation - Buildings Plant and equipment Accumulated Depreciation - Plant and Equipment Accounts payable Tax payable Short term loan (unsecured) Mortgage on Land and buildings Retained earnings General reserve 80,000 preference shares issued at $2 paid to $1 136,000 A ordinary shares issued for $2, called to $1.50 100,000 B ordinary shares issued for $1, called to 75c 160 000 60 000 50 000 12 000 80 000 170 600 41 600 80 000 204 000 75 000 1 088 600 1088 600 Additional information (a) The liquidation expenses amounted to $4 800. (b) Other unsecured liabilities accepted by the liquidator and not yet recorded are: Interest on mortgage $ 3 000 Increase in accounts payable 4 000 Wages payable 2 500 Interest on short term loan 600 (c) There is an arrears of preference dividend of $12,000. (d) The mortgage holder took possession of the land and buildings and sold them for $186,000, paid off the mortgage and refunded the difference to the liquidator. (e) The sale proceeds of assets realised the following amounts in cash: Accounts receivable $ 56 000 Inventory 28 000 Plant and equipment 46 000 (f) Payments made by liquidator after negotiation with creditors was $62 000: (g) The constitution gives preference shareholders priority of payment of arrears of preference dividends. It also provides that all shareholders rank equally regarding return of capital based on the number of shares held. Any calls necessary to adjust the rights of contributories, if necessary, are recoverable. Required 1. Prepare all the relevant journal entries in Mr Lunch Ltd to wind up the company. Narrations are required. Clearly show the order of priority of payment to the creditors! 2. Show clearly any workings in relation to the final distribution to shareholders. 3. Prepare the Liquidation account, the Shareholder's distribution account and Liquidator's cash account. Show all of the relevant detail in the account entries (i.e. do not aggregate transactions into one amount). The trial balance of Mr Lunch Ltd on 9th August 2019, the date on which the court ordered that the company be wound up, is presented below. MR LUNCH LTD Trial Balance as at 9 August 2019 Credit Cash Accounts receivable Inventory Debit 1 800 69 000 29 200 36 000 140 000 432 000 Goodwill Land 326 000 210 000 Buildings Accumulated Depreciation - Buildings Plant and equipment Accumulated Depreciation - Plant and Equipment Accounts payable Tax payable Short term loan (unsecured) Mortgage on Land and buildings Retained earnings General reserve 80,000 preference shares issued at $2 paid to $1 136,000 A ordinary shares issued for $2, called to $1.50 100,000 B ordinary shares issued for $1, called to 75c 160 000 60 000 50 000 12 000 80 000 170 600 41 600 80 000 204 000 75 000 1 088 600 1088 600 Additional information (a) The liquidation expenses amounted to $4 800. (b) Other unsecured liabilities accepted by the liquidator and not yet recorded are: Interest on mortgage $ 3 000 Increase in accounts payable 4 000 Wages payable 2 500 Interest on short term loan 600 (c) There is an arrears of preference dividend of $12,000. (d) The mortgage holder took possession of the land and buildings and sold them for $186,000, paid off the mortgage and refunded the difference to the liquidator. (e) The sale proceeds of assets realised the following amounts in cash: Accounts receivable $ 56 000 Inventory 28 000 Plant and equipment 46 000 (f) Payments made by liquidator after negotiation with creditors was $62 000: (g) The constitution gives preference shareholders priority of payment of arrears of preference dividends. It also provides that all shareholders rank equally regarding return of capital based on the number of shares held. Any calls necessary to adjust the rights of contributories, if necessary, are recoverable. Required 1. Prepare all the relevant journal entries in Mr Lunch Ltd to wind up the company. Narrations are required. Clearly show the order of priority of payment to the creditors! 2. Show clearly any workings in relation to the final distribution to shareholders. 3. Prepare the Liquidation account, the Shareholder's distribution account and Liquidator's cash account. Show all of the relevant detail in the account entries (i.e. do not aggregate transactions into one amount)
