Ch 14: Other Company Issues 503

14.9 Introduces shareholders preferred as to return of capital

On 1 January 20X2 Network Ltd went into liquidation. A balance sheet, prepared for internal purposes, disclosed:
Network Ltd
Balance Sheet as at 1 January 20X2
Assets $ $ $
Current assets 782 900
Inventory 545 800
Accounts receivable 185 400
Less Allowance doubtful debts 7 900 177 500
Bank 58 600
Petty cash 1 000

Non-current assets 1 128 900

Land and buildings 640 000
Less Accumulated depreciation – buildings 27 300 612 700
Plant and machinery 364 000
Less Accumulated depreciation 127 800 236 200
Goodwill on acquisition 280 000
1 911 800
Liabilities
Current liabilities 76 800
Accounts payable 76 800

Issued and paid-up capital 2 000 000

1 000 000 ordinary shares issue price $1 fully paid 1 000 000
1 000 000 ordinary shares issue price $1 fully paid 1 000 000
Accumulated losses (165 000)
Shareholders’ equity 1 835 000
1 911 800

The assets realised:

$
Land and building 636 000
Plant and machinery 184 500
Inventory 475 000
Accounts receivable 170 000

Additional information
1. Accounts payable were paid in full plus $464 interest charged by one creditor on an overdue account.
2. The constitution discloses that preferential shareholders were preferential as to return of capital in the event of
liquidation.
3. Expenses of liquidation were $19 100.

Required: Prepare general ledger accounts for:

(a) liquidation account;
(b) bank account; and
(c) shareholders’ distribution account (in tabular form).