Please explain where do those numbers come from(6 numbers) PRACTICE QUESTION 5 ?
ID: 2413502 • Letter: P
Question
Please explain where do those numbers come from(6 numbers) PRACTICE QUESTION 5 ? TOPIC 11-PRACTICE QUESTION Toby Wolf Ltd was placed into liquidation on 2 October 2017. After identifying all assets and liabilities at the date of liquidation, the company's trial balance at that date comprised: Toby Wolf Ltd (In liquidation) Trial Balance as at 2 October 2017 Dr Account Accrued salaries and wages (no excluded employees) Accumulated depreciation Accumulated losses Allowance for doubtful debts Bank overdraft Building Cash on hand Debentures (secured by mortgage on building) General reserve Patent Interest payable (Debentures) Inventory Issued capital (fully paid) Land Dividend payable Trade payable Trade receivable Total 42,000 620,000 1,058,000 12,000 12,000 2,620,000 16,000 1,660,000 1,100,000 130,000 12,000 270,000 1,650,000 980,000 28,000 24,000 86,000 5,160,000 5,160,000 (a) The non-cash assets realised $1,500,000 in total, of which $1,200,000 relates to the sale of the building (b) Liquidation fees/expenses are expected to be 2% of cash received from asset sales. Required: Prepare the Liquidation, Creditor's Control, Receipts and Payments and Member Distribution general ledger accounts to show the final liquidation of Toby Wolf Ltd, showing all workings and calculations.Explanation / Answer
The first four numbers are calculated as follows:
1. Debenture residual (1,660,000, - 1,200,000 = 460,000), interest payable (12000),trade payables (24000) and bank overdraft (12000) are not secured by any of asset.
2. The remaining balance in liquidation receipts and payments account before allocating to above liabilities is 244,000.
3. So the remaining balance is distributed in the ratio of liability i.e., in the ratio of 460:12:24:12
4. Debenture residual = 244000 x 460/508 = 220945
Interest payable = 244000 x 12/508 = 5765
Trade payable = 244000 x 24/508 = 11525
Bank overdraft = 244000 x 12/508 = 5765
The fifth number is obtained as follows:
The first account in presentation is liquidation account and the amount of balance in that account is transferred to members distribution a/c i.e., 1,984,000
The sixth number is obtained as follows:
Total debentures are 1,660,000 and is secured by building. So the proceeds of building are 1,200,000 which are to be repaid to debenture holders. So the residual debentures are 1,660,000 - 1,200,000 = 460,000.