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.
What will be the deficiency or surplus apportioned to preference shareholders?

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.
What will be the deficiency or surplus apportioned to preference shareholders?

Quizplus · Accepted Answer

Given the total cash available is $10,000 and all shares rank equally, the total number of shares is 40,000 preference + 120,000 ordinary = 160,000 shares. Each share gets an equal part of the $10,000, which is $10,000 / 160,000 = $0.0625 per share. Preference shareholders hold 40,000 shares, so they receive 40,000 * $0.0625 = $2,500. Since they had initially invested $40,000, the deficiency is $40,000 - $2,500 = $37,500. However, the correct answer is not directly provided in the options, indicating a potential misunderstanding in the question's interpretation. The calculation provided was to demonstrate the approach based on the information given and the assumption that all shares rank equally. The correct interpretation should consider the total shares and the cash available for distribution, but without specific details on how the deficiency is calculated per option, the direct calculation leads to a different conclusion. The mistake here is in the calculation explanation not matching the provided options, suggesting a reevaluation of the question's premise or the options given.

The Details Below Were Extracted from the Accounting Records of Great