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Peppermint Ltd went into voluntary liquidation on 30 June 2020. A statement of financial position prepared...

Peppermint Ltd went into voluntary liquidation on 30 June 2020. A statement of financial position prepared at that date was as follows:

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Peppermint Ltd

Statement of Financial Position as at 30 June 2020

Current Assets

Cash                                                                                                                         $11,000

Inventories                                                                                                                 85,700

Total Current Assets                                                                                               96,700

Non-current Assets

Equipment                                                                                                               142,800

Land and Buildings                                                                                                   70,000

Total Non-current Assets                                                                                      212,800

Total Assets                                                                                                            309,500

Current Liabilities

Accounts Payable                                                                                                      40,000

Total Current Liabilities                                                                                         40,000

Non-current Liabilities

Mortgage (secured over Land and Buildings)                                                           80,000

Total Non-current Liabilities                                                                                 80,000

Total Liabilities                                                                                                      120,000

Net Assets                                                                                                             $189,500

Equity

300,000 ordinary shares issued for $1 each, fully paid                                           300,000

Accumulated Losses                                                                                              (110,500)

Total Equity                                                                                                         $189,500

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Additional information:

(a)        The sale proceeds of assets realised the following amounts in cash:

            Inventories                                     $70,000

            Equipment                                        80,000

(b)       The mortgage holder took possession of the land and buildings and sold them for $90,000 and after settlement of the debt paid any excess funds to the liquidator.

(c)        Liquidation costs amounted to $15,000.

(d)       The liquidator paid all liabilities.

Required:

  1. Prepare general journal entries to record the liquidation of Peppermint Ltd.

Solutions

Expert Solution

ANSWER

Journal Entries in the books of Peppermint Ltd.

on Liquidation:

Date

Acc Titles

Debit $

Credit $

30-Jun-20

Liquidator Final Statement

161000

Cash

11000

Inventory

70000

Equipment

80000

(The assets transferred to liquidators account

on disposal)

30-Jun-20

Liquidator Final Statement

10000

Mortgage

80000

Land and buildings

90000

(mortgage are settled through Land and

buildings and remainder transferred to liquidators)

30-Jun-20

Liquidation expense

15000

Liquidator Final Statement

15000

(liquidation expenses paid off)

30-Jun-20

Accounts Payable

40000

Liquidator Final Statement

40000

(all current liabilities paid off)

30-Jun-20

Equity shareholders

116000

Liquidator Final Statement

116000

(Balance in Liquidators Statement

settled to the Ordinary shareholders)

================

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ekkarill92 answered 2 years ago
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