Show the formula and explain why please Toby Wolf Ltd was placed into liquidatio

Question

Show the formula and explain why please Toby Wolf Ltd was placed into liquidation on 2 October 2017. After identifying all assets and liabilities at the date of liquidation, the company's trial balance at that date comprised: Toby Wolf Ltd (In liquidation) Trial Balance as at 2 October 2017 Account Accrued salaries and wages (no excluded employees) Accumulated depreciation Accumulated losses Allowance for doubtful debts Bank overdraft Building Cash on hand Debentures (secured by mortgage on building) General reserve Patent Interest payable (Debentures) Inventory Issued capital (fully paid) Land Dividend payable Trade payable Trade receivable Total 42,000 620,000 1,058,000 12,000 12,000 2,620,000 16,000 1,660,000 1,100,000 130,000 12,000 270,000 1,650,000 980,000 28,000 24,000 86,000 5,160,000 5,160,000 The non-cash assets realised $1,500,000 in total, of which $1,200,000 relates to the sale of the building (a) (b) Liquidation fees/expenses are expected to be 2% of cash received from asset sales. Required Prepare the Liquidation, Creditor's Control, Receipts and Payments and Member Distribution general ledger accounts to show the final liquidation of Toby Wolf Ltd, showing all workings and calculations.

Explanation / Answer

Debenture residual is an amount which has not yet recovered through mortgage selling. Building is the mortgage of debenture. Since the company goes into liquidation, the debenture amount should be paid off by the realization of building; the unpaid amount should be treated as debenture residual.

[Note: Book value of building is not important hear]

Debenture residual = Book value of debentures – Realization of building

                                    = 1,660,000 – 1,200,000

                                    = $460,000 (Answer)

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