Cashless Ltd went into voluntary liquidation on 1 April 2019.
Statement of Financial Position
as at 1 April 2019
Liabilities and equity
280 000 ordinary shares
Land and buildings (net)
$649 600 $649 600
(a) The liquidator discovered that debenture interest of $5 250 was due on 1 April 2019. The overdraft with
the Katherine Bank had been secured by a mortgage over the plant. The bank has agreed that the
liquidator may sell the plant and use the proceeds to repay the overdraft. The mortgage loan is secured
over land and buildings which will be sold by the mortgagee to repay the amount owing. The inventory
has been used as a circulating security for the debentures. The other payables were loans from directors
that were made on 1 December 2018.
(b) The sale of the assets realised the following amounts:
Land and buildings
Less: Rates and selling expenses
Less: Mortgage loan
$ 280 000
Plant and equipment
$ 599 200
(c) The following payments were made by the liquidator:
Accounts payable (after creditors’ discounts)
Additional amounts not recorded in the records:
Holiday pay — employee
Retrenchment payment — employee
Income tax penalty
You are required to prepare the following accounts, using T accounts, and not journal entries:
A. The Liquidation Account.
B. The Liquidator’s Statement of Receipts and Payments.
C. The Shareholders’ Distribution account.
Q4 George Ltd acquired 60% of the shares of Orwell Ltd in February 2017. Although George Ltd has 100%
subsidiaries this is the first acquisition that George Ltd has made with a non-controlling interest (NCI) partly
funding the other company. Eric Blair, the financial accountant of George Ltd has asked you to write a report
advising him as to the best approach he should take when he prepares the consolidated financial statements
for the Orwell Group of companies.
As he has never had to calculate the share of the equity in Orwell Ltd funded by the NCI he is worried about
how he should calculate it. He is especially interested in how the calculation should take place in the years
after the acquisition date. He tells you that some of his colleagues in other companies have mentioned a ‘step’
approach which apparently makes accounting for the accounting periods after the date of acquisition very
easy as it is then necessary to prepare only one step.
Prepare a report for Eric, explaining the step approach to the calculation of NCI and the effects of this
approach in the years after the date of acquisition.
The report should take the format of a formal business report, written by your firm with yourself as lead author.
Marks will be awarded for presentation style and an appropriate business format.