This article provides solutions and journal entries for liquidation of assets. It includes estimated realisable value, creditors, shareholders, and more. The journal entries in the books of Caps Limited are also provided. The article is relevant for finance and accounting students studying liquidation.
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Liquidation Liquidation 1|P a g e
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Liquidation Table of Contents Solution: 1...................................................................................................................................................3 Solution: 2...................................................................................................................................................4 Solution: 3...................................................................................................................................................5 Solution: 4...................................................................................................................................................6 2|P a g e
Liquidation Solution: 1 Report as to Affairs Particulars Estimated Realisable Value Assets not specially pledged Plant & Equipment95000 Cash46000 Accounts Receivable 11600 0 Inventory 20400 0 Bills Receivable72000 Calls in Arrear18000551000 Estimated Surplus from the Assets pledged (W.N. 1)55000 Estimated Total Asset Available for Prefential Creditor, Debenture Holder & Unsecured Creditors606000 Less: Liqudator Remuneration & Expenses12400 Less: Prefential Creditors20000 Less: Debenturholders Secured by Circulating Charge57600 Less: Interest on Debenture300093000 Estimated surplus for Unsecured Creditors513000 Less: Unsecured Creditors 18000 0 Creditors not recorded8000 Discount on Settlement-6000 Salaries & wages not recorded6000 Income Tax payable8000196000 Estimated surplus for Shareholders317000 Preference Shares120000 Estimated Surplus as regards to Equity Shareholders197000 W.N.-1: Estimated Surplus from the Assets pledged Estimated Realisable Value of Land & Building 26000 0 Due to Secured Mortgage 20000 0 Interest on Mortgage5000 Estimated Surplus from the Assets55000 3|P a g e
Liquidation pledged Solution: 2 Journal Entries in the books of Caps Limited ParticularsDebitCredit Liquidator's Cash Account Dr. 60600 0 To Plant & Equipment95000 To Cash46000 To Accounts Receivable 11600 0 To Inventory 20400 0 To Bills Receivable72000 TO CALLES IN ARREAR18000 TO REALIZATION FROM ASSETS PLEDGED55000 Being Assets sold for liquidation. Liquidation A/c Dr. 60600 0 To Liquidator's Cash Account 60600 0 Being Liquidator's Cash Transfer to liquidation account for further payment. Liqudator Remuneration & Expenses Dr.12400 Prefential Creditors Dr.20000 Debenturholders Secured by Circulating Charge Dr.57600 Interest on Debenture Dr.3000 Unsecured Creditors Dr. 18200 0 Salaries & Wages Dr.6000 Income Tax Payable Dr.8000 Shareholders Distribution Account Dr. 31700 0 To Liquidation A/c 60600 0 Being Payment made sequentially to Creditors. Preference Share Holders Dr. 12000 0 Equity Share Holders Dr. 19700 0 4|P a g e
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Liquidation To Shareholders Distribution Account 31700 0 Being remaining surplus transfer to shareholders account. Solution: 3 LIQUIDATOR'S CASH ACCOUNT DEBIT AMOU NTCREDIT AMOU NT TO ASSETS REALISEDBy Liquidation Account606000 Plant & Equipment95000 Cash46000 Accounts Receivable116000 Inventory204000 Bills Receivable72000 TO CALLES IN ARREAR18000 TO REALIZATION FROM ASSETS PLEDGED55000 TOTAL606000TOTAL606000 LIQUIDATION ACCOUNT DEBIT AMOU NTCREDIT AMOU NT TO LIQUIDATOR'S Cash Account606000 By Liqudator Remuneration & Expenses12400 By Prefential Creditors20000 By Debenturholders Secured by Circulating Charge57600 By Interest on Debenture3000 By Unsecured Creditors182000 5|P a g e
Liquidation By Salaries & Wages6000 By Income Tax Payable8000 By Shareholders Distribution Account317000 TOTAL606000TOTAL606000 SHAREHOLDERS DISTRIBUTION ACCOUNT DEBIT AMOU NTCREDIT AMOU NT TO LIQUIDATION ACCOUNT317000By Preference Share Holders120000 By Equity Share Holders197000 TOTAL317000TOTAL317000 Solution: 4 Particulars Amoun t Estimated surplus for Shareholders317000 Preference Shares120000 Estimated Surplus as regards to Equity Shareholders197000 6|P a g e