Advanced Financial Accounting II

M.Com Second Semester 2013-14

LIQUIDATION OF COMPANY
PROBLEM 1 Following information was extracted from the books of A Ltd Company on 31st December 2012 on which date a winding up order was made Cash in hand Rs.5,000 Stock in trade [estimated to produce Rs.15000] Rs.20,000 Furniture and fittings [estimated to produce Rs.2100] Rs.3,000 Plant and machinery [estimated to produce Rs.15,600] Rs.15,000 Land & Building [estimated to produce Rs.45,000] Rs.30,000 Book debts [estimated to produce Rs.5200] Rs.6200 Unsecured creditors Rs.70,000 Preferential creditors Rs. 2,000 Creditors fully secured [value of security Rs.11000] Rs.9,000 Partly secured creditors [value of security Rs.6,000] Rs.10,000 Bank O/D secured by a second charge on all assets of the company Rs.8,000 10% debentures secured by floating charge on all assets of the company [Interest paid to date] Rs.50,000 Equity share capital 6000 shares of Rs.10 each Rs.60,000 11% preference share capital 6500 shares of Rs.10 each Rs.65,000 Calls in arrear of equity share [estimated to produce Rs.1000] Rs.2500 Prepare statement of affairs PROBLEM 2 Following information was extracted from the books of Lucky Ltd Company on 31st December 2012 on which date a winding up order was made Unsecured creditors Rs.3,50,000 Salary due for 5 months Rs.20,000 Managing directors remuneration due Rs.30,000 Bills payable Rs.1,06,000 Debtors : Good Rs.4,30,000 Doubtful Rs.1,30,000 [estimated to produce Rs.62,000] Bad Rs.88,000 B/R [ Good Rs.10,000] Rs.16,000 Bank O/D Rs.40,000 Land [estimated to realize Rs.5,00,000] Rs.3,60,000 Stock [estimated to realize Rs.5,80,000] Rs.8,20,000 Furniture Rs.80,000 Cash in hand Rs.4,000 Estimated liability for bills discounted Rs.60,000 Secured creditors holding first mortgage on Land Rs.4,00,000 Partly secured creditors having second mortgage on Land Rs.2,00,000 Weekly wages unpaid Rs.6,000 Liability under working compensation Act 1925 Rs.2,000 Income Tax due Rs.8,000
St.Berchmans College, Chry

Page

Advanced Financial Accounting II

M.Com Second Semester 2013-14

5,000, 9% debentures of Rs.100 each in 30th June and 31st December and paid up to 30-6-2012] Share capital: 20,000, 10% preference shares of Rs.10 each 50,000 equity shares of Rs.10 each General reserve since 31st December, 2008

Rs.5,00,000 [Interest payable

Rs.2,00,000 Rs.5,00,000 Rs.1,00,000

In 2008 the company earned profit of Rs.4,50,000 but thereafter it suffered trading loss totaling Rs.5,84,000. The company also suffered a speculation loss of Rs.50,000 during the year 2009. Excise authorities imposed a penalty of Rs.3,50,000 in 2010 for evasion of tax which was paid in 2011. From the forgoing information prepare statement of affairs and deficiency account

PROBLEM:3 Mr.AB is appointed as liquidator of a company in voluntary liquidation on 1-07-2012. And the following balances are extracted from the books on that day. BALANCE SHEET 16000 equity shares of Rs.5 each 80,000 Machinery debentures 50,000 Leasehold premises Bank O/D 18,000 Stock Provision for bad debts 10,000 Book debts Liability for purchases 20,000 Investments cash in hand calls in arrear P&L A/c 178,000

30,000 40,000 1,000 60,000 6,000 1,000 5,000 35,000 178,000

1. The machinery is valued at Rs.60,000, Lease hold premises at Rs.73,000, Investments @ Rs.4,000, Stock in trade @ Rs.2,000, Bad debts are Rs.2,000, Doubtful debts are Rs.4,000[ estimated to realize Rs.2,000] 2. Bank O/D is secured by the deposit of title deeds of lease hold property 3. Preference creditors for tax and wages are Rs.1,000 4. Telephone rent outstanding Rs.80 You are required to prepare statement of affairs and deficiency/ surplus account as per List H

St.Berchmans College, Chry

Page

Advanced Financial Accounting II

M.Com Second Semester 2013-14

PROBLEM 4 Insol Ltd is to be liquidated. Ledger balance sin its books as at 30th September 2012 appears as under. BALANCE SHEET 250000 equity shares of Rs10each 2,500,000 L&B 500,000 Secured debentures[on L&B] 1,000,000 Other Fixed assets 2,000,000 Unsecured Loans 2,000,000 Current Assets 4,500,000 Trade Creditors 3,500,000 P&L A/c 2,000,000 9,000,000 9,000,000 Contingent liabilities are: For bills discounted Rs.1,00,000 For excise duty demand Rs.1,50,000 On investigation, it is found that the contingent liabilities were certain to devolve and that the assets are likely to be realized as follows: Land & Buildings Rs.11,00,000 Other Fixed Assets Rs.18,00,000 Current Assets Rs.35,00,000 Taking the above into account, prepare statement of affairs PROBLEM 5 H Ltd went into liquidation on 1st July 2012. The following particulars are available. 20000, 8% Pref.shares of Rs.100 each fully paid 1000000 equity shares of Rs.5 each fully called up 5,000,000 less: calls in arrear 20,000 Secured Loan[ on mortgage of L&B] Secured Loan[ on floating charge on assets] unsecured creditors[ including pref.creditors Rs.1,20,000] Estimated to Realize 360,000 2,400,000 200,000 800,000

2,000,000 4,980,000 300,000 1,600,000 43,20,000

Assets L&B Plant and Machinery Other Fixed Assets Stock Sundry Debtors: Good Bad Doubtful B/R Advances [Considered Bad] Cash Bank
St.Berchmans College, Chry

Book Value 600,000 3,000,000 80,000 1,600,000 1,656,000 80,000 300,000 40,000 200,000 24,000 20,000

200,000 90%

Page

Advanced Financial Accounting II

M.Com Second Semester 2013-14

Bills discounted but not matured Rs.40,000 of which Rs.20,000 is expected to be bad. On 1st January 2007 the company had a credit balance of Rs.2,00,000 in its P&L a/c. During 2007 it made a profit of Rs.15,00,000 after tax and paid dividend to preference shareholders @8% and equity share holders @ 10%. In 2009 company suffered a trading loss of Rs.10,00,000, speculation loss of Rs.5,00,000 besides imposition of penalty by excise authority of Rs.5,00,000. In 2010 company suffered a loss of Rs.46,42,000. Since then the accounts are not been made up. You are required to prepare statement of affairs and deficiency account PROBLEM 6 Unfortunate Ltd is to be wound by in June 30th ,2008 as per the winding up order. Equity share capital: 30,000 shares of Rs.10 each Rs.3,00,000 6% preference shares 4500 shares of Rs.100 each Rs.4,50,000 Calls in arrear [estimated to produce Rs.3000] Rs.6,000 5% debentures [secured by a floating charge on all assets] Rs.3,00,000 Fully secured creditors [value of shares in Beta Ltd Rs.60,000] Rs.52,500 Partly secured creditors [value of shares in Gama Ltd Rs.30,000] Rs.60,000 Preferential creditors Rs.11,250 Unsecured creditors Rs.4,05,000 Bank O/D[ secured by a second charge on all assets] Rs.30,000 Cash in hand Rs.3,300 Book debts: Good Rs.55500 Doubtful [estimated to produce 37.5%] Rs.12,000 Bad Rs.6,750 Stock[ estimated to produce Rs.90,000] Rs.1,08,000 L&B [estimated to produce Rs.2,92,000] Rs.3,15,000 Furniture [estimated to produce Rs.12,000] Rs.18,000 P&M[estimated to produce Rs.80,000] Rs.90,000 Prepare statement of affairs PROBLEM 7 Following particulars relates to a Ltd Company which has gone into voluntary liquidation. You are required to prepare liquidators final statement of accounts, allowing for his remuneration @ 2% on the amount realized on assets and @ 2% on the amount distributed to unsecured creditors other than pref. creditors Unsecured creditors Rs.2,24,000 Pref. Creditors Rs.70,000 Debentures Rs.75,000 Assets realized the following sum: Cash in hand Rs.20,000 L&B Rs.1,30,000 P&M Rs.1,10,500 Furniture Rs.7500 Liquidation expenses amount to Rs.2,000. A call of Rs.2/ share on the partly paid 1000 equity shares was made and duly paid except in case of 1 shareholder holding 500 shares.

St.Berchmans College, Chry

Page

Advanced Financial Accounting II

M.Com Second Semester 2013-14

PROBLEM 8 The following particulars relates to A Ltd which has gone into voluntary liquidation. Prepare liquidators final statement of account allowing for his remuneration @2% on the amount realized and the amount distributed to unsecured creditors other than preferential creditors. Pref. creditors Rs.10,000 Unsecured creditors Rs.32,000 Debentures Rs.10,000 Assets realized are: L&B Rs.20,000 P&M Rs.18,650 Furniture Rs.1,000 Liquidation expenses Rs.1,000 PROBLEM 9 Following is the balance sheet of H Ltd as on 31st March 2008 BALANCE SHEET 14% Pref.shares of Rs.100 each fully paid 400,000 Land 40,000 8000 equity shares Rs.100 [ Rs.60 paid up] 480,000 Building 160,000 Secured Loan P&M 540,000 14% Debentures having floating charge on Patent 40,000 all assets 230,000 Stock 100,000 Interest accrued on debentures Sundry Debtors 230,000 [also having floating charge] 32,200 cash at Bank 60,000 P&L A/c 240,000 Loan on Mortgage of L&B 150,000 Sundry Creditors 117,800 1,410,000 1,410,000 On 31st March 2008 Company went into liquidation. The dividend on preference shares was in arrear for 1 year. Sundry creditors include preferential creditors amounting to Rs.30,000 The assets realized the following mount Land Rs.80,000 Building Rs.5,00,000 P&M Rs.50,000 Patent Rs.50,000 Stock Rs.1,60,000 Debtors Rs.2,00,000 The expenses of liquidation amounted to Rs.29,434. The liquidator is entitled to get a commission of 2% on all assets realized except cash in hand and 2% on amount distributed to unsecured creditors other than preferential creditors. All payments were made on 30th June 2008. Interest on mortgage loan shall be ignored at the time of payment. Prepare liquidators final statement of account

St.Berchmans College, Chry

Page

Advanced Financial Accounting II

M.Com Second Semester 2013-14

PROBLEM 10 K Ltd was liquidated on 31st December 2008 BALANCE SHEET 100,000 L&B 100,000 P&M 50,000 Stock 80,000 Debtors Cash in hand P&L A/c 330,000

Share capital 8% Debentures Mortgage Loan [secured on L&B] Sundry Creditors

60,000 60,000 60,000 70,000 5,000 75,000 330,000

1. Assets realized as follows: a. L&B Rs.55,000 b. Stock Rs.20,000 c. P&M Rs.25,000 2. Half of the debtors were bad and the balance realized 60% of the book value 3. Preferential creditors amounted to Rs.10,000 [included in Sundry Creditors] 4. Liquidator is entitled to a commission of 3% on amount realized other than cash and 2% on the amount paid to unsecured creditors. 5. Liquidation expenses amounted to Rs.970 Prepare Liquidators final statement of affairs. PROBLEM 11 B Ltd went into voluntary liquidation on 31st December 2009. Its Balance Sheet was as follows: BALANCE SHEET 10000, 10% cum.pref.shares L&B 500,000 1,250,000 of Rs.100 each fully paid 1,000,000 P&M 5000 equity shares of Rs.100 each Stock 275,000 [Rs.75 paid up] 375,000 Patent 200,000 15000 equity shares of Rs.100 each Debtors 550,000 [Rs.60 paid up] 900,000 Cash in hand 150,000 15% debentures P&L A/c 562,500 [secured by floating charge] 500,000 Interest outstanding on Debentures 75,000 Creditors 637,500 3,487,500 3,487,500

St.Berchmans College, Chry

Page

1. Preference dividend were in arrear for 2 years and the creditors included preferential creditors of Rs.76,000 2. The assets realized as follows: a. L&B Rs.6,00,000 b. P&M Rs.10,00,000 c. Patent Rs.1,50,000

Advanced Financial Accounting II

M.Com Second Semester 2013-14

d. Stock Rs.3,00,000 e. Sundry Debtors Rs.4,00,000 3. Expenses of Liquidation amounted to Rs.54500 4. The liquidator is entitled to a commission of 3% on assets realized except cash, assuming the final payment including those of debentures is made on 30th June 2010. Prepare liquidators final statement of account PROBLEM 12 B Ltd went into voluntary liquidation. The details regarding liquidation are as follows 1. Share capital: 2000, 8% preference shares of Rs.100 each fully paid up Rs.2,00,000 2000 equity shares of Rs.100 each [ Rs.75 paid up] Rs.1,50,000 1600 equity shares of Rs.100 each [Rs.60 paid up] Rs.96,000 1400 equity shares of Rs.100 each [Rs.50 paid up] Rs.70,000 2. Assets including machinery realized Rs.4,20,000 3. Liquidation expense Rs.15,000 4. B Ltd has borrowed a loan of Rs.50,000 from Patel Brothers against the mortgage of machinery which realized Rs.80,500 5. In the books of the company the salary of 4 clerks for 4 months @ Rs.250/ month and salary of 4 peons for 3 months @ Rs.150/ month are outstanding. In addition to this, companies book shows creditors worth Rs.88,200 Prepare liquidators final statement of account. PROBLEM 13 B Ltd went into voluntary liquidation on 31st March 2001. Balance sheet as on that date BALANCE SHEET 5000, 6% pref.shares of Rs.100 each Land 50,000 [ fully paid] 500,000 Building 200,000 2500 equity shares of Rs.100 each P&M 625,000 [Rs.75 paid up] 187,500 Stock 137,500 7500 equity share of Rs.100 each Sundry Dr 275,000 [Rs.60 paid up] 450,000 cash at bank 75,000 5% Debentures [secured on floating P&L A/c 410,000 charge on all assets] 250,000 Interest due on debentures 12,500 Bank O/D 100,000 Unsecured Creditors 200,000 Tax due to govt. 12,500 Salary & wages due for 4 months for workers 60,000 1,772,500 1,772,500
Page

1. The liquidator is entitled to a remuneration of 5% on all assets realized except cash and 1% on the amount distributed to unsecured creditors other than preferential creditors

St.Berchmans College, Chry

Advanced Financial Accounting II

M.Com Second Semester 2013-14

2. Bank O/D is secured by deposit of title deeds of L&B which realized Rs.3,00,000. Other assets realized the following; a. P&M Rs.5,00,000 b. Stock Rs.1,50,000 c. Debtors Rs.2,00,000 d. Expenses of liquidation Rs.27250 3. Preference dividends were in arrear for 2 years. Prepare liquidators final statement of account PROBLEM 14 Bad luck Ltd went into voluntary liquidation and the proceedings commenced on 2nd July 2012. Certain creditors could not receive payment out of the realization of assets and out of the contributions from the contributories of the A List. Following details of shares transfers are made available to you: Creditors remaining unpaid and Date of the outstanding at the transferor ceasing to time of transferor be a member ceasing to be a member

Name of the transferor share holder

No.of shares transferred

A 1000 1st March 2011 6000 B 1250 15th August 2011 8000 C 500 1stOctober 2011 10750 D 2000 1st December 2011 13000 E 250 1st April 2012 15000 All the shares were of Rs.10 each on which Rs.5 per share had been paid up. Ignoring other details like liquidators expenses etc. you are required to work out the liability of the individual contributories listed above.

St.Berchmans College, Chry

Page