2023 Q3 Cashless Ltd went into voluntary liquidation on 1 April 2019 Cashless Ltd Statement of Financial | Assignments Online

Q3. 

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 

Debentures 

Bank overdraft 

Accounts payable 

Other payables 

 

$322 000 

7 000 

105 000 

70 000 

56 000 

56 000 

 33 600

Assets 

Land and buildings (net) 

Plant (net) 

Bank deposit 

Accounts receivable 

Investments 

Inventory 

 

$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 

Investments 

Inventory 

 273 000 

8 400 

63 000 

21 000 

 70 000

 $ 599 200

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

 Debentures 

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. 

Required 

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)