Deck 14: Liquidations

Question 1

What is the dividend per dollar owed, payable to employees owed annual leave, if the total proceeds available for distribution is $250 000 and the security realises sufficient cash to fully discharge the secured debt? (The $250 000 includes the amount paid to secured creditors.)

A)$1.00 (fully paid)
B)$0.86
C)$0.45
D)$0.50

Answer 1

B

Question 2

Deferred debts to members are paid after all other debts but before return of capital

Answer 2

True

Question 3

The liquidator ascertains that the following amounts are owed to the parties of Mainstreet Ltd:
I.employees' wages $45 000
II.creditors secured by a fixed charge $110 000
III.unsecured creditors $65 000
IV.annual leave for employees $110 000
What is the order in which these parties will be paid? (From first to last reading left to right)

A)I, II, III then IV
B)II, I, IV then III
C)I, IV, II then III
D)II, I, III then IV

Answer 3

B

Question 4

All shares rank equally for return of capital except where for a particular class of shares a different ranking is expressly provided in the company's constitution or the terms of issue.

Question 5

The court received an application for the winding up of Amer Ltd.If the application is granted this winding-up will be a:

A)compulsory
B)creditors' voluntary
C)members' compulsory
D)members' voluntary

Question 6

Crown debts in all cases have priority over other debts.

Question 7

A liquidator has been appointed to Young Ltd.The liquidator decides to call a meeting of creditors in order to better understand the company's circumstances and to form an elected group of people to oversee the liquidation process.This group is called a/an:

A)liquidation group
B)committee of inspection
C)inspection group
D)liquidation committee

Question 8

After payment of all claims apart from payment to capital contributors, the liquidator prepares the following statement of shareholders' equity for Hoppers Ltd:
$\begin{array}{lr} & \$ \\\text { Preference shares fully paid (20 000) } & 200000 \\\text { Ordinary shares fully paid (4 000 000) } & 4000000 \\\text { General Reserve } & 100000 \\\text { Accumulated losses } & \underline{(900000)} \\ \text { Total } & 3400000\end{array}$

The total cash available is $1 200 000.What is the total difference between the interest of shareholders in the equity of Hoopers Ltd and the amount that they will receive.

A)$3 000 000
B)$3 400 000
C)$1 200 000
D)$2 200 000

Question 9

The company went into liquidation on 1 August 20X1 with net debt of $6 000 000.What is the maximum amount, if any, the liquidator can require the shareholders of Dooby Ltd to pay per share?

A)Nil
B)$0.70
C)$0.625
D)$0.60

Question 10

After payment of all claims apart from payments to capital contributors, the liquidator prepared the following statement of shareholders' equity for Train Ltd:
$\begin{array}{llcc} \text { Preference shares \( (20000) \) } &40000 \\ \text { Ordinary shares (100 000) } &300000\\ \text {Accumulated losses } &\underline{(155000)}\\ \text { Total} &185000\\\end{array}$

There is $125 000 cash remaining for distribution and all shares are fully paid.What is the dividend per preference share if preference shareholders rank equally with ordinary shareholders? (Note: Round amounts to nearest cent.)

A)$6.25
B)$0.50
C)$1.04
D)$9.25

Question 11

The company went into liquidation on 1 August 20X1 with net debt of $7 000 000.What is the maximum amount, if any, the liquidator can require the shareholders of Dooby Ltd to pay per share?

A)Nil
B)$0.70
C)$0.625
D)$0.60

Question 12

The legal precedents on the rights of preference shareholders on liquidation are increasingly irrelevant.

Question 13

After payment of all claims apart from payments to capital contributors, the liquidator prepares the following statement of shareholders' equity for Hoppers Ltd:
$\begin{array}{llcc} \text { } &\$\\ \text {Ordinary shares fully paid ( 5000000\( ) \) } &2000000 \\ \text { Reserve} &?\\ \text { Accumulated losses } &(1500000)\\ \text { Total} &?\\\end{array}$

What is the total of the reserves if the cash available for distribution after all other claims is $850 000 and the deficit is $550 000?

A)$900 000
B)$950 000
C)$1 350 000
D)$1 400 000

Question 14

A liquidator has priority for amounts that relate to:

A)costs incurred in the liquidation and for the liquidators fees
B)costs incurred in the liquidation only
C)the liquidators fees
D)costs incurred in the liquidation and for the liquidators fees

Question 15

When determining the amount to be returned to shareholders, we must consider the amount for which the shares were initially issued.

Question 16

After payment of all claims apart from payments to capital contributors, the liquidator prepared the following statement of shareholders' equity for Train Ltd:
$\begin{array}{llcc} \text { Preference shares \( (20000) \) } &40000 \\ \text { Ordinary shares (100 000) } &300000\\ \text {Accumulated losses } &\underline{(155000)}\\ \text { Total} &185000\\\end{array}$

There is $125 000 cash remaining for distribution and all shares are fully paid.What is the dividend per preference share if preference shareholders rank ahead of ordinary shareholders?

A)$0.25
B)$0.50
C)$1.00
D)$2.00