In: Accounting
Q2. A liquidator was appointed after Rock Bottom Pty Ltd was declared insolvent on 1 July 2018. The company’s assets realised $14,250,000. This came from the sale of the secured land and buildings for $7,500,000 and other assets which were sold for $6,750,000.
The creditors totalled $16,350,000, and were made up of the following amounts:
Secured creditor $9,000,000, receiver’s costs when realising secured asset $150,000, liquidator’s expenses $600,000, unsecured trade payables $2,400,000, tax payable $1,050,000, local government rates $300,000, staff wages payable $900,000, executive directors’ wages payable (5 directors) $450,000, staff leave entitlements $150,000, executive directors’ leave entitlements (5 directors) $150,000, unsecured bank overdraft $750,000, and dividends payable $450,000.
REQUIRED
You are required to rank the above creditors and then to calculate how much each creditor would be paid.
The following is the rank for each debt -
1. Secured Creditors |
Allotment after 4-7 |
2. Receivers Cost |
3. Liquidator Expenses |
4. Taxes Due |
4. Government payments |
6. Staff wages payable |
7. Staff leave entitlements |
8. Unsecured bank OD |
8. Trade payables |
9. Excecutive director wages |
9. Excecutive director leave entitlements |
10. Dividends |
Settlement of Claims
Claim | Settled | Balance | |
1. Secured Creditors | 9,000,000.00 | 7,500,000.00 | |
Allotment after 4-7 | 1,500,000.00 | - | |
2. Receivers Cost | 150,000.00 | 150,000.00 | - |
3. Liquidator Expenses | 600,000.00 | 600,000.00 | - |
4. Taxes Due | 1,050,000.00 | 1,050,000.00 | - |
4. Government payments | 300,000.00 | 300,000.00 | - |
6. Staff wages payable | 900,000.00 | 900,000.00 | - |
7. Staff leave entitlements | 150,000.00 | 150,000.00 | - |
8. Unsecured bank OD * | 750,000.00 | 500,000.00 | - |
8. Trade payables * | 2,400,000.00 | 1,600,000.00 | - |
9. Excecutive director wages | 450,000.00 | - | - |
9. Excecutive director leave entitlements | 150,000.00 | - | - |
10. Dividends | 450,000.00 | - | - |
14,250,000.00 | |||
* Since full fund to settle is not available. It will be settled in pro rata basis | |||
Fund available | 2,100,000.00 | ||
TO be allocated | 3,150,000.00 |