Cashless Ltd went into voluntary liquidation on 1 April 2019.

Cashless Ltd

Statement of Financial Position

as at 1 April 2019

Liabilities and equity

Share capital:

280 000 ordinary shares

fully paid

Retained earnings

Mortgage loan


Bank overdraft

Accounts payable

Other payables


$322 000

7 000

105 000

70 000

56 000

56 000

33 600


Land and buildings (net)

Plant (net)

Bank deposit

Accounts receivable




$175 000

280 000

7 000

68 600

35 000

84 000


$649 600 $649 600

Additional information

(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

(11 200)

(105 000)


$163 800

Plant and equipment

Bank deposit

Accounts receivable



273 000

8 400

63 000

21 000

70 000

$ 599 200

(c) The following payments were made by the liquidator:


Debenture interest

Bank overdraft

Accounts payable (after creditors’ discounts)

Other payables

Additional amounts not recorded in the records:

Liquidator’s remuneration

Liquidation expenses

Holiday pay — employee

Retrenchment payment — employee

Income tax penalty

$70 000

5 250

56 000

53 200

33 600

17 500

7 700

7 000

2 800

2 100

$255 150

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.

(20 marks)

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.

(5 marks)

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.

(5 marks)

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *