Question

A compulsory winding up in insolvency order was issued by the court in respect of Rock Bottom Ltd. The company had a capital of 65 000 fully paid ordinary shares of $1 each. The liquidator took possession of the company’s assets which raised $873 145 on sale. Included in the sale proceeds was $221 000 from the disposal of the land and buildings.

The creditors submitted their claims and the following debts were admitted as proven:

Liquidation expenses $3 900
Liquidator’s remuneration 10 400
Mortgage loan secured on land and buildings 130 000
Additional mortgage loan on land and buildings 104 000
Employees’ wages 5 employees for 2 weeks at $520 per week 5 200
Secretary’s salary — 3 weeks at $314 per week 942
Employees’ holiday pay 6 500
Sales commission 650
Managing director’s salary — 4 weeks at $780 per week 3 120
Directors’ fees 3 900
Trade creditors 104 000
Unsecured loan stock 130 000
Debentures (secured by circulating security interest) 390 000
PAYG tax instalment 1 014
Fringe benefits tax 2 600
GST 2 586

Required
Show the order of priority of payment of debts for Rock Bottom Ltd and calculate the amount payable to the company’s ordinary unsecured creditors.

Answer 1

Sale Proceeds
6,52,145	Other Assets
2,21,000	Land & Building
8,73,145	Total

Payments	Amounts
Liquidation Expenses	3,900
Liquidation Remuneration	10,400
Salaries & Wages	6,142
Taxes	6,200
Remaininig Salary Expenses	14,170
Unsecured Loans	1,30,000
Balance Mortagage	13,000
Debentures	3,90,000
Creditors	78,333
Total Payments	6,52,145

Balance unsecured Creditors = 1,04,000 - 78,333 = 25,667

Balance Mortagage = 2,21,000 - 1,30,000 - 1,04,000 = 13,000

Salaries & Wages = 942 + 5,200 = 6,142 ( Wages of Employees + Secretary Salary )

Remaining Salary Expenses = 6,500 + 650 + 3,120 + 3,900 = 14,170

Taxes = 1,014 + 2,600 + 2,586 = 6,200 (PAYG + GST + Fringe )