Question

Q1. A compulsory winding up in insolvency order was issued by the court in respect of Rock Bottom Ltd. The company had a capital of 65 000 fully paid ordinary shares of $1 each. The liquidator took possession of the company’s assets which raised $873 145 on sale. Included in the sale proceeds was $221 000 from the disposal of the land and buildings.

The creditors submitted their claims and the following debts were admitted as proven:

Liquidation expenses $3900

Liquidator’s remuneration $10 400

Mortgage loan secured on land and buildings $130 000

Additional mortgage loan on land and buildings $104 000

Employees’ wages - 5 employees for 2 weeks at $520 per week $5200

Secretary’s salary — 3 weeks at $314 per week $942

Employees’ holiday pay $6500

Sales commission $650

Managing director’s salary — 4 weeks at $780 per week $3120

Directors’ fees 3900 Trade creditors $104 000

Unsecured loan stock $130 000

Debentures (secured by circulating security interest) $390 000

PAYG tax instalment $1014

Fringe benefits tax $2600

GST $2586

Required

Show the order of priority of payment of debts for Rock Bottom Ltd and calculate the amount payable to the company’s ordinary unsecured creditors.

Answer 1

Solution:

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