Deck 15: External Administration Reports and Accounts

Question 1

Sox Ltd has two classes of ordinary shares: 100 000 fully paid A ordinary shares (paid-up share capital $100 000) and 25 000 fully paid B ordinary shares (paid-up share capital $100 000).The company was placed in liquidation.Liquidator's fees totaled $85 000, the assets were sold for $1 775 000 and these assets had a carrying amount of $1 600 000.

-Which of the following entries is most likely to correctly show the members' distribution account of Sox Ltd?

A) $\begin{array} { l c c } & \text { Debit (\$) } & \text { Credit (\$) } \\\text { Paid-up capital } - \text { A ordinary } & & 100000 \\\text { Paid-up capital - B ordinary } & & 100000 \\\text { Retained profits } & ? & \\\text { Reserves } & ? & \\\text { Liquidation } & ? & \\\text { Receipts and payments account } & ? &\end{array}$
B) $\begin{array}{lcc}& \text { Debit (\$) } & \text { Credit (\$) }\\\text { Paid-up capital }-\text { A ordinary } &&100000 \\\text { Paid-up capital }-\text { B ordinary } & &100000 \\\text { Retained profits } &? & \\\text { Reserves } & &? \\\text { Liquidation } & ? & \\\text { Receipts and payments account } & ? & \end{array}$

C) $\begin{array}{lcc}& \text { Debit (\$) } & \text { Credit (\$) }\\\text { Paid-up capital }-\text { A ordinary } &&100000 \\\text { Paid-up capital }-\text { B ordinary } & &50000 \\\text { Retained profits } &? & \\\text { Reserves } & &? \\\text { Liquidation } & ? & \\\text { Receipts and payments account } & ? & \end{array}$


D) $\begin{array} { l r r } & \text { Debit (\$) } & \text { Credit (\$) } \\\text { Paid-up capital } - \text { A ordinary } & 100000 & \\\text { Paid-up capital } - \text { B ordinary } & 50000 & ? \\\text { Retained profits } & & ? \\\text { Reserves } & & ? \\\text { Liquidation } & & ?\end{array}$

Answer 1

$\begin{array}{lcc}& \text { Debit (\$) } & \text { Credit (\$) }\\\text { Paid-up capital }-\text { A ordinary } &&100000 \\\text { Paid-up capital }-\text { B ordinary } & &100000 \\\text { Retained profits } &? & \\\text { Reserves } & &? \\\text { Liquidation } & ? & \\\text { Receipts and payments account } & ? & \end{array}$

Question 2

Various reports can be prepared when a company is involved in an external administration including:
I.chronological listing of receipts and payments
II.summary of receipts and payments since the commencement of the administration
III.cash position
IV.supporting schedules
V.statement of position in winding up
A voluntary administrator will prepare the following reports:

A)each of I, II, III, IV and V
B)I and II only
C)I only
D)none of I, II, III, IV and V

Answer 2

D

Question 3

The summary of affairs is the same as the report as to affairs except that the former does not include the supporting schedules.

Answer 3

True

Question 4

Sox Ltd has two classes of ordinary shares: 100 000 fully paid A ordinary shares (paid-up share capital $100 000) and 25 000 fully paid B ordinary shares (paid-up share capital $100 000).The company was placed in liquidation.Liquidator's fees totaled $85 000, the assets were sold for $1 775 000 and these assets had a carrying amount of $1 600 000.

-Which of the following correctly shows the liquidation account of Sox Ltd?

A) $\begin{array}{lcc}& \text { Debit (\$) } & \text { Credit (\$) } \\\text { Assets }&1600000 \\\text { Receipts and payments account - assets sale } & &1775000 \\\text { Receipts and payments account - costs } & 85000 & \\\text { Members' distribution account } & 90000\end{array}$

B) $\begin{array}{lcc}& \text { Debit (\$) } & \text { Credit (\$) } \\\text { Assets }&&1600000 \\\text { Receipts and payments account - assets sale } & 1775000 \\\text { Receipts and payments account - costs } & 85000 & \\\text { Members' distribution account } && 90000\end{array}$


C) $\begin{array}{lcc}& \text { Debit (\$) } & \text { Credit (\$) } \\\text { Assets }&&1600000 \\\text { Receipts and payments account - assets sale } & 1775000 \\\text { Members' distribution account } &175000\end{array}$


D) $\begin{array}{lcc}& \text { Debit (\$) } & \text { Credit (\$) } \\\text { Assets }&&1600000 \\\text { Receipts and payments account - assets sale } & 1775000 \\\text { Members' distribution account } &&175000\end{array}$

Question 5

Various reports can be prepared when a company is involved in an external administration including:
I.chronological listing of receipts and payments
II.summary of receipts and payments since the commencement of the administration
III.cash position
IV.supporting schedules
V.statement of position in winding up
A liquidator will prepare the following reports:

A)each of I, II, III, IV and V
B)I and II only
C)I only
D)none of I, II, III, IV and V

Question 6

A report as to affairs is required for the Court appointment of a liquidator but not for the appointment of a controller or other administrator.

Question 7

When a company is liquidated, in closing the company's ledgers there is always a debit to the paid-up capital accounts.

Question 8

Sox Ltd has two classes of ordinary shares: 100 000 fully paid A ordinary shares (paid-up share capital $100 000) and 25 000 fully paid B ordinary shares (paid-up share capital $100 000).The company was placed in liquidation.Liquidator's fees totaled $85 000, the assets were sold for $1 775 000 and these assets had a carrying amount of $1 600 000.

-B ordinary shareholders have preference for return of capital.Which of the following extract of entries is most likely to correctly show the members' distribution account of Sox Ltd assuming the preference is fully satisfied?

A) $\begin{array}{llcc} \text { } & \text { Debit (\$)} &\text { Credit (\$)}\\ \text { Members' distribution - A ordinary} &&100000\\ \text {Members' distribution \(- \mathrm { B }\) ordinary } &?\\\end{array}$

B) $\begin{array}{llcc} \text { } & \text { Debit (\$)} &\text { Credit (\$)}\\ \text { Members' distribution - A ordinary} &&?\\ \text {Members' distribution \(- \mathrm { B }\) ordinary } &&50000\\\end{array}$

C) $\begin{array}{llcc} \text { } & \text { Debit (\$)} &\text { Credit (\$)}\\ \text { Members' distribution - A ordinary} &?\\ \text {Members' distribution \(- \mathrm { B }\) ordinary } &100000\\\end{array}$

D) $\begin{array}{llcc} \text { } & \text { Debit (\$)} &\text { Credit (\$)}\\ \text { Members' distribution - A ordinary} &&?\\ \text {Members' distribution \(- \mathrm { B }\) ordinary } &&100000\\\end{array}$

Question 9

In an external administration, the net realisable value of the assets is the same as the net fair value used in determining recoverable amount under AASB 136.

Question 10

The external reports prepared by an administrator are:

A)normally sent to non-shareholders if requested
B)lodged with ASIC and are on the public record
C)lodged with ASIC but are not on the public record
D)lodged with the ASX and are not on the public record

Question 11

During the appointment period, a liquidator must prepare accounts for each:

A)one-month period
B)two-month period
C)six-month period
D)eight-month period

Question 12

Various reports can be prepared when a company is involved in an external administration including:
I.chronological listing of receipts and payments
II.summary of receipts and payments since the commencement of the administration
III.cash position
IV.supporting schedules
V.statement of position in winding up
A receiver or other controller will prepare the following reports:

A)each of I, II, III, IV and V
B)I and II only
C)I only
D)none of I, II, III, IV and V

Question 13

In a statement of solvency, a firm's assets and liabilities should be measured at:

A)carrying amount using the cost model
B)carrying amount using revaluation model
C)net realisable value
D)recoverable amount

Question 14

When a company is liquidated, in closing the company's ledgers there is always a debit to the retained profits account.

Question 15

With respect to the report as to affairs, which statement is correct? The total carrying amount of assets is:

A)likely to be higher than the total of their estimated realisable values
B)likely to be lower than the total of their estimated realisable values
C)unable to be determined and must be estimated with reference to a comparable company
D)likely to be equal to the total of their estimated realisable values