Question

On 30 April 2019, Moth Ltd went into voluntary liquidation. At that date, equity comprised:

	Share capital:   100 000 preference shares issued for $2 and fully paid   220 000 ordinary shares issued for $2 and fully paid   160 000 ‘A’ ordinary shares issued for $2 and paid to 1.20c   20 000 ‘B’ ordinary shares issued for $2, called and paid to $1		$   200 000 440 000 192 000     20 000
	Retained earnings		852 000 (512 000)
	Total equity		$  340 000

The liquidator proceeded to realise all of the company’s assets. The loss on liquidation amounted to $128 000 and, after paying sundry creditors, there was a cash balance of $212 000 available for distribution to the shareholders. (The constitution gives preference shareholders a prior claim to return of capital, and other shareholders are to rank equally, based on the number of shares held.)

Required

Prepare a statement of the distribution to shareholders supported by a detailed explanation of the apportionment of any cash among the various classes of shareholders.

Answer 1

Liquidator's Statement of Receipt and Payments

Receipts	$	Payments	$
Balance after paying liabilities	212,000	Distribution to:
Call on ‘A’ Ordinary	64,000	Preference S/Hs	$200,000
Call on ‘B’ Ordinary	12,000	Ordinary S/Hs	88,000
	288,000		288,000

Distribution of cash

No of shares Paid to Notional Call Notional Refund 40c Actual Refund (Call) Deficiency share $ $ $ $ $ Ordinary 220,000 440,000 0 88,000 88,000 132,000 ‘A’ ordinary 160,000 192,000 128,000 64,000 (64,000) 96,000 ‘B’ ordinary 20,000 20,000 20,000 8,000 (12,000) 12,000 400,000 652,000 148,000 160,000 12,000 240,000 Cash available* 12,000 12000 Deficiency 640,000 Total notional cash 160,000

Total notional cash per share = $160,000 ÷ 400,000 = 40c per share

* $12,000 = $212,000 - $200,000

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