No.

1 for CA/CWA & MEC/CEC MASTER MINDS

5. LIQUIDATION OF COMPANIES
SOLUTIONS TO ASSIGNMENT PROBLEMS
Problem No. 1
th
Statement of Affairs of ‘A’ Ltd. (in Liquidation) as at 30 September, 2011

Estimated
Realisable
Value (Rs.)
Assets not specifically pledged (as per List A):
Other Fixed Assets 36,00,000
Current Assets 70,00,000
Total 1,06,00,000
Assets specifically pledged (as per List B):
Estimated Due to Deficiency Surplus
Realizable Secured Ranking as Carried to the
Value Creditors Unsecured last column
Rs. Rs. Rs. Rs.
Land & 22,00,000 20,00,000 - 2,00,000 2,00,000
Building
Estimated total assets available for preferential creditors debenture
holder secured by a floating charge and unsecured creditors 1,08,00,000
Summary of Gross Assets:
Gross realizable value of assets specifically pledged 22,00,000
Other Assets 1,06,00,000
Total Assets 1,28,00,000
Liabilities
Gross
Liabilities
Liabilities
20,00,000 Secured creditors (as per List B) to the extent to which claims are
estimated to be covered by assets specifically pledged -
3,00,000 Preferential creditors (as per List C) – for demand of excise duty 3,00,000
Balance of assets available for debenture holders secured by floating 1,05,00,000
charge and unsecured creditors -
- Debenture holders secured by floating charge (as per List D)
Unsecured creditors (as per List E):
40,00,000 Unsecured Loans 40,00,000
70,00,000 Trade creditors 70,00,000
2,00,000 Liability for bills discounted (Contingent) 2,00,000
1,35,00,000 Estimated deficiency as regards creditors (difference between gross 7,00,000
assets and gross liabilities)
Issued and called up capital:
5,00,000 Equity shares of Rs.10 each (as per List G) 50,00,000
Estimated deficiency as regards members/ contributories 57,00,000

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Problem No. 2
Prakash Processors Limited Liquidator’s Statement of Account

Receipts Amount Amount Payments Amount Amount

To Assets realised By Liquidation expenses 27,250
– Bank 75,000

Other assets: By Liquidator’s Remuneration 36750

Land etc. 3,00,000 By Debenture holders:
Machinery etc. 5,00,000 Debentures 2,50,000
Patents 75,000 Interest accrued 37,500
Stock 1,50,000 Interest 1-1-11/ 30-6-11 18,750 3,06,250
Trade receivables 2,00,000 12,25,000 By Preferential creditors 38,000
By Unsecured creditors 2,80,750
By Preferential
shareholders:
Preference capital 5,00,000
Arrear of Dividend 1,00,000 6,00,000
To Call on equity By Equity share holders
share holders Rs.12.35 on 2,500 shares 30,875
(7,500 x Rs.2.65) 19,875
(1)
13,19,875 13,19,875

Working Notes:
3
1. Liquidator’s remuneration = 12,25,000 x = Rs.36,750
100

2. As the company is solvent, interest on the debentures will have to be paid for the period 1-1-2011 to
15 1
30-6-2011 = 2,50,000 x x x = Rs.18,750
100 2
3.
Particulars Amount
Total equity capital – paid up 6,37,500
Less: Balance available after payment to unsecured and preference shares 11,000
(13,00,000 – 12,89,000)
Loss to be borne by 10,000 equity shares 6,26,500
Loss per share 62.65
Hence, amount of call on Rs.60 paid share 2.65
Refund to share on Rs.75 paid 12.35

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 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Problem No. 3
Dr. Liquidator’s final statement of Account Cr.
Receipts Amount Amount Payments Amount Amount
To amount realised By legal charges 780
from assets not
specifically pledged:
Furniture 7,800 By Liquidation expenses 650
Debtors (W.N – 1) 1,03,025 By Liquidator’s remuneration 6,500
SV of LIP received from 15,015 By Preferential creditors:
a debtors (15,600-585)
Cash at bank 11,700 1,37,540 Income tax (2000-01) 14,300
To amount realised Salaries of employees 10,640 24,940
from assets - (15,590 – 4,950)
specifically pledged
To amount received 19,500 By creditors with floating
from contributories charges:
(6,500 - 2,600)5
14% Debentures 26,000
By unsecured creditors @ 98,170
0.6321 (W.N-3)
1,57,040 1,57,040
W.N.1:
Sundry Debtors - Rs.1,04,000

Basis Ltd other debtors

6500 97,500
(975)
5525
5,525 + 97,500 = 1,03,025
W.N.2:
Sundry trade creditors - Rs.1,07,000

One of the creditors other creditors

13,000 94,000
(1625)
11,375

11,375 + 94,000 = 1,05,375

W.N.3: Unsecured creditors
Particulars Amount
Income tax for 1999-2000 3,250
MD’s Salary 4,950
Loan from bank 39,000
Trade creditors (W.N-2) 1,05,375
Salaries in lieu of notice 2,730
1,55,305
98,170 / 1,55,305 = 0.6321

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Problem No. 4
M. Ltd. (in liquidation)
st th
Liquidator’s Statement of Account from 1 January, 2011 to 30 June, 2011

Particulars Amount Amount Particulars Amount Amount

Balance at bank 74,000 Liquidator’s remuneration 7302*
(3% on Rs.2,43,398)
Realisation from: Liquidation Expenses 3,000
Sundry Debtors 52,000 Loan on mortgage with 2,04,000
Accrued interest**
M Ltd.- Creditors including 75,500
Outstanding Expenses
Rs.1,40,000 6% 1,42,800 Return contributors: 1,00,000
Debentures 6% Preference
shareholders Rs.10 per
share
Cash 2,62,200 4,05,000 6% Debentures Cash (03 1,42,800
P. approx..)
6 months’ interest on 4,200 per share 598 1,43,398
debentures
5,35,200
Less: Cost of Collection 2,000
of Debts
5,33,200 5,33,200
* 3/103 x 2,50,700 (i.e. Rs.5,32,000 less payments made to all creditors)
** It is assumed that loan is secured by a floating charge

Problem No.5
(i) Liquidator’s Statement of Account

Particulars Amount Particulars Amount

To Assets realized 23,20,000 By Liquidator’s remuneration
(20,00,000+3,20,000) 2.5% on 23,20,000*
To Receipt of call money on 58,000 58,000
29,000 equity shares @ 2 2% on 50,000 1,000 85,255
per share 2% on 13,12,745 (W.N.3)
26,255
By Liquidation Expenses 10,000
By secured creditors 320000
By Debenture holder having a 6,00,000
floating charge on all assets
By Preferential creditors 50,000
By Unsecured creditors 13,12,745
23,78,000 23,78,000

* Total assets realised = Rs.20,00,000 + Rs.3,20,000 = Rs.23,20,000

(ii) Percentage of amount paid to unsecured creditors to total unsecured creditors

13,12,745
= x 100 = 71.73%
18,30,000

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Working Notes:
1. Unsecured portion in partly secured creditors = Rs.3,50,000 – Rs.3,20,000 = Rs.30,000
2. Total unsecured creditors = 18,00,000 + 30,000 (W.N.1) = Rs.18,30,000
3. Liquidator’s remuneration on payment to unsecured creditors
Cash available for unsecured creditors after all payments including payment to preferential creditors
& liquidator’s remuneration on it = Rs.13,39,000 [20,58,000-58,000-1,000-10,000- 6,00,000-50,000]
2
Liquidator’s remuneration on unsecured creditors = x 13,39,000 = Rs.26,255 or on
102
2
= x 13,12,754 = Rs.26,255
100

PROBLEM NO. 6
Statement of liabilities of B List Contributories

Creditors outstanding on the date of Amount to be paid

Q R S T
transfer (ceasing to be member) to creditor
No. of shares 1,200 1,500 800 500
Date Rs. Rs. Rs. Rs. Rs. Rs.
15.5.2010 5,000 1,500 1,875 1,000 625 5,000
18.9.2010 9,200
-5,000 4,200 - 2,250 1,200 750 4,200
10,500
24.12.2010 -9,200 1,300 - - 800 500 1,300
11,000
12.3.2011 10,500 500 - - - 500 125*
Total (a) 11,000 1,500 4,125 3,000 2,375 10,625
Maximum liability on 4,800 6,000 3,200 2,000
shares held (b)
Amount paid (a) and 1,500 4,125 3,000 2,000
(b) whichever is lower

Working Note:
P will not be liable since he transferred his shares prior to one year preceding the date of winding up.
th
The amount of Rs.5,000 outstanding on 15 May, 2010 will have to contributed by Q, R, S and T in the
ratio of number of shares held by them, i.e. in the ratio of 12:15:8:5; thus Q will have to contribute
Rs.1,500; R Rs.1,875; S Rs.1,000; T Rs.625.
th th
Similarly, the further debts incurred between 15 May, 2010 to 18 September, 2010, viz. Rs.4,200 for
which Q is not liable will be contributed by R, S and T in the ratio of 15:8:5. R will have to contribute
Rs.2,250, S and T will contribute Rs.1,200 and Rs.750 respectively.
th
The further increase from Rs.9,200 to Rs.10,500 viz. Rs.1,300 occurring between 18 September and
th
24 December will be shared by S and T who will be liable for Rs.800 and Rs.500 respectively.
th th
The increase between 24 December and 12 March, is solely the responsibility of T.
Note: Against T’s liability of Rs.2,375, he can be called upon to pay Rs.2,000, the loss of Rs.375 will
have to be suffered by creditors.

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Problem No. 7
Receiver’s Receipts and Payments Accounts

Receipts Amount Amount Payments Amount Amount

Sundry Assets realised 2,00,000 Costs of the Receiver 2,000
Surplus received from Preferential payments -
mortgage: Creditors paid Taxes
raised within 12 months 26,000
Debentures holders
Sale Proceeds of land and 1,50,000 Principal 1,50,000
building
Less: Applied to 80,000 70,000 Interest for half year 9,750 1,59,750
discharge of mortgage loan
Surplus transferred to the 82,250
Liquidator
2,70,000 2,70,000

Liquidator’s Final Statement of Account

Particulars Amount Particulars Amount Amount

Surplus received from 82,250 Cost of Liquidation 2,800
Receiver
Assets Realised 1,00,000 Remuneration to Liquidator 3,000
Call on Contributories: Unsecured Creditors:
Trade 32,000
Directors for payment of
Bank O/D 30,000 62,000
On holder of 5,000 at the Preferential Shareholders:
rate of Rs.2.17 per share 10,850
Principal 1,00,000
Arrears of Dividends 22,000 1,22,000
Equity shareholders:
Return of money to contributors 3,300
to holder of 10,000 shares at 33
paise each
1,93,100 1,93,100

Working Note: Call from party paid shares

Particulars Amount
Deficit before call from Equity Shares (1,82,250 – 1,89,800) 7,550
Notional call on 5,000 shares @ Rs.2.50 each 12,500
Net balance after notional call 4,950
No. of shares deemed fully paid 15,000
4,950 33p
Refund on fully paid shares
15,000
Calls on party paid share (2.50 – 0.33) 2.17

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Problem No. 8

Receiver’s Receipts and Payments Account

Receipts Amount Amount Payments Amount Amount
Sundry Assets realized 2,00,000 Costs of the Receiver 1,950
Surplus received from Preferential payments:
Mortgage loan : - Income Taxes (raised
Sale Proceeds of land within 12 months) 25,000
and building 1,60,000 Debentures holders :
Less: Applied to Principal amount
discharge mortgage Interest for half year 1,50,000
loan (70,000) 90,000 Surplus transferred to 9,750 1,59,750
the Liquidator 1,03,300
2,90,000 2,90,000

Liquidator’s Final Statement of Account

Receipts Amount Payments Amount
Surplus received from 1,03,300 Cost of Liquidation 3,000
Receiver Remuneration to Liquidator
Assets Realised 1,50,000 (1,50,000 x 2%) 3,000
Calls on Contributories : Unsecured Creditors :
On holder of 5,000 6,900 Trade 38,000
Equity Shares at the Directors for Bank
rate of ` 1.38 per share O/D cleared 30,000 68,000
Preferential Shareholders:
Capital 1,50,000
Arrears of Dividends 30,000 1,80,000
Equity shareholders:
Return of money to holders
of 10,000 equity shares at
62 paise each
6,200
2,60,200 2,60,200

Working Note:
Call from partly paid shares
Deficit before call from Equity Shares Rs.
= Rs.(1,03,300+1,50,000) – Rs.(3,000+3,000+68,000+1,80,000) = 700
Notional call on 5,000 shares @ Rs.2 each 10,000
Net balance after notional call (a) 9,300
No. of shares deemed fully paid (b) 15,000
9,300
Refund on fully paid shares = Rs.0.62
15,000
Calls on partly paid share (Rs.2 — Rs.0.62) = Rs.1.38

THE END

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