The details below were extracted from the accounting records of Great South East Ltd (a company in the process of liquidation).$ \begin{array}{ll}
&\$\
40000 \$ 1 \text { preference shares fully paid } & 40000 \ 120000 \$ 1 \text { ordinary shares paid to } 50 \text { cents } & \underline{60000} \ & \underline{100000}
\
\
\text { Cash available (after payment of all creditors)}&10000
\end{array} $

Assume that the constitution of Great South East Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
For preference shareholders, what is the amount of the actual refund or call?

Question

The details below were extracted from the accounting records of Great South East Ltd (a company in the process of liquidation).$ \begin{array}{ll}
&\$\
40000 \$ 1 \text { preference shares fully paid } & 40000 \ 120000 \$ 1 \text { ordinary shares paid to } 50 \text { cents } & \underline{60000} \ & \underline{100000}
\
\
 \text { Cash available (after payment of all creditors)}&10000
\end{array} $

Assume that the constitution of Great South East Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
For preference shareholders, what is the amount of the actual refund or call?

Quizplus · Accepted Answer

The preference shareholders are entitled to a refund of $17,500. This is calculated as follows:Total amount available for distribution = $100,000Number of shares = 160,000 (40,000 preference shares + 120,000 ordinary shares)Amount per share = $100,000 / 160,000 = $0.625Refund to preference shareholders = 40,000 shares x $0.625 = $17,500

The Details Below Were Extracted from the Accounting Records of Great