University Company Accounting Liquidation Assignment Solution

This document presents a comprehensive solution to a company accounting assignment concerning the liquidation of a company, specifically Mr. Lunch Ltd. It details the process of closing accounts, paying creditors, selling assets, and distributing remaining capital to shareholders. The solution includes all necessary journal entries, meticulously accounting for asset transfers, liabilities, and shareholder equity. The document also provides a clear demonstration of the final distribution of funds to shareholders, including workings and calculations. Furthermore, it includes the preparation of key financial statements such as the Liquidation account, the Shareholder’s distribution account, and the Liquidator’s cash account, showcasing the financial impact of each transaction. The assignment covers the order of priority of creditor payments and presents the cash flow during the liquidation process. Finally, the document contains a bibliography of relevant sources.

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student:
Name of the University:
Authors Note:

COMPANY ACCOUNTING 1
Table of Contents
In liquidating a company, we are bringing all the accounts to a close: ..................................... 2
Preparing all the relevant journal entries in Mr Lunch Ltd to wind up the company: ............... 2
Show clearly any workings in relation to the final distribution to shareholders: ...................... 4
Preparing the Liquidation account, the Shareholder’s distribution account and Liquidator’s
cash account: .............................................................................................................................. 5
Bibliography: ............................................................................................................................. 7

COMPANY ACCOUNTING 2
In liquidating a company, we are bringing all the accounts to a close:
The essential of the action that is conducted for liquidation company are Paying off
the creditors, selling all the relevant assets and returning any leftovers capital to shareholders.
Preparing all the relevant journal entries in Mr Lunch Ltd to wind up the company:
Particulars Dr/Cr Amount Amount
Liquidation Dr 344,200
Accounts receivable Cr 69,000
Inventory Cr 29,200
Goodwill Cr 36,000
Plant and equipment Cr 210,000
Asset accounts transferred to liquidation
Accumulated Depreciation - Plant and Equipment Dr 160,000
Liquidation Cr 160,000
Contra-asset accounts transferred to liquidation
Cash Dr 130,000
Liquidation Cr 130,000
Proceeds on sale of assets
Liquidation Dr 84,900
Liquidation expenses Cr 4,800
Interest on mortgage Cr 3,000
Accounts payable Cr 62,000
Wages payable Cr 2,500
Arrears of preference dividend Cr 12,000
Interest on short term loan Cr 600
Unrecorded liabilities debited to liquidation account
Accounts payable Dr 2,000
Liquidation Cr 2,000
Discount given by payables
Mortgage on Land and buildings Dr 80,000
Cash Dr 106,000
Liquidation loss Dr 60,000
Accumulated depreciation Dr 326,000
Land and Building Cr 572,000
Sale of land and buildings by mortgage holder

COMPANY ACCOUNTING 3
Call of Preference shares Dr 80,000
Share Capital – Preference Cr 80,000
Call made on Preference shares for $1 per share
Call on A Ordinary shares Dr 68,000
Share Capital – ‘A’ Ordinary Cr 68,000
Call made on ‘A’ ordinary shares for 50c per share
Call on B Ordinary shares Dr 25,000
Share Capital – ‘B’ Ordinary Cr 25,000
Call made on ‘B’ ordinary shares for 35c per share
Cash Dr 173,000
Call of Preference shares Cr 80,000
Call on A Ordinary shares Cr 68,000
Call on B Ordinary shares Cr 25,000
Receipt of cash on Call
Liquidation expenses Dr 4,800
Interest on mortgage Dr 3,000
Increase in accounts payable Dr 4,000
Wages payable Dr 2,500
Interest on short term loan Dr 600
Cash Cr 14,900
Liabilities paid in order of priority
Share Capital – ‘A’ Ordinary Dr 272,000
Share Capital – ‘B’ Ordinary Dr 100,000
Share Capital – Preference Dr 80,000
Shareholders’ Distribution Cr 452,000
Transfer of share capital to shareholders' distribution
Liquidation Dr 170,600
Retained earnings Cr 170,600
Transfer of accumulated losses to liquidation
Shareholders’ Distribution Dr 206,100
Liquidation Cr 206,100
Deficiency on liquidation transferred
Shareholders’ Distribution Dr 325,900

COMPANY ACCOUNTING 4
Cash Cr 325,900
Final payment to shareholders as per schedule
Creditor’s in priority order of payment
Liquidation expenses (paid first in practice) 4,800
Interest on mortgage 3,000
Interest on short term loan 600
Increase in accounts payable 4,000
Wages payable 2,500
14,900
Clearly showing the order of priority of payment to the creditors:
No of
shares
Paid
to
Notional
call
Notional
refund
Actual
refund
Deficiency
share
Preference
shares
80,000
160,0
00
160,000 -
‘A’ Ordinary 136,000
272,0
00
65,900.00 65,900 206,100
‘B’ Ordinary 100,000
100,0
00
100,000 -
316,000
532,0
00
206,100
Cash available
325,9
00
325,900
Deficiency
206,1
00
Total notional
cash
325,900
Show clearly any workings in relation to the final distribution to shareholders:
Accounts receivable 56,000 + Inventory + 28,000 + Plant and equipment 46,000 = Sales
proceeds of assets 130,000.

COMPANY ACCOUNTING 5
Land and Building 572,000 - Accumulated depreciation 326,000 = Carrying amount 246,000,
Carrying amount 246,000 – Sale price 186,000 = Loss in sale -60,000,
Sale price 186,000 – Mortgage 80,000 = Cash leftover 106,000.
Preparing the Liquidation account, the Shareholder’s distribution account and
Liquidator’s cash account:
Liquidator’s Cash
Cash balance transferred 1,800 Balance c/d 237,800
Liquidation (sale of assets) 130,000
Bal. from secured creditors 106,000
237,800 237,800
Balance b/d 237,800 Liquidation expenses 4,800
Call of Preference shares 80,000 Interest on mortgage 3,000
Call on A Ordinary shares 68,000 Accounts payable 62,000
Call on B Ordinary shares 25,000 Wages payable 2,500
Arrears of preference dividend 12,000
Interest on short term loan 600
Balance c/d 325,900
410,800 410,800
Balance b/d 325,900 Shareholders’ Distribution
Preference shares 160,000
‘A’ Ordinary 65,900
‘B’ Ordinary 100,000
325,900 325,900
Shareholders’ Distribution
Balance c/d 532,000 Share Capital – Preference 160,000
Share Capital – ‘A’ Ordinary 272,000
Share Capital – ‘B’ Ordinary 100,000
532,000
Liquidation deficiency 206,100 Balance b/d 532,000
Cash
Preference shares 160,000
‘A’ Ordinary 65,900

COMPANY ACCOUNTING 6
‘B’ Ordinary 100,000
532,000 532,000
Liquidation
Accounts receivable 69,000
Accumulated Depreciation - Plant and
Equipment 160,000
Inventory 29,200 Cash on sale of assets 130,000
Goodwill 36,000 Accounts payable discount 2,000
Plant and equipment 210,000 Other assets 103,600
Liquidation expenses 4,800 Balance c/d 35,500
Interest on mortgage 3,000
Accounts payable 4,000
Wages payable 2,500
Arrears of preference
dividend 12,000
Interest on short term
loan 600
Loss on sale of assets 60,000
431,100 431,100
Balance b/d 35,500 Balance c/d 206,100
Retained earnings 170,600
206,100 206,100
Balance b/d 206,100 Shareholders’ Distribution
Preference shares -
‘A’ Ordinary 206,100
‘B’ Ordinary -
206,100 206,100

COMPANY ACCOUNTING 7
Bibliography:
Berzkalne, I. and Zelgalve, E., 2014. Intellectual capital and company value. Procedia-Social
and Behavioral Sciences, 110, pp.887-896.
Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2019. Intermediate accounting. John Wiley
& Sons.