Show the order of priority of payment of debts for Master Ltd and calculate the amount payable to the company’s trade accounts payable
Show the order of priority of payment of debts for Master Ltd and calculate the amount payable to the company’s trade accounts payable
Chapter7: Corporations: Reorganizations
Section: Chapter Questions
Problem 23P
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Question
Master Ltd, whose capital consisted of $500,000 in fully paid shares, was wound up as a result of a court order. Its liquidator realised $891,950 from the sale of the company’s assets. This amount included $250,000 from the proceeds on sale of the company’s land and buildings. Debts proved and admitted were:
Unsecured notes
$150,000
Debentures (secured by circulating security interest)
350,000
First mortgage on land and buildings
200,000
Trade accounts payable
78,000
PAYG tax instalment
860
Fringe benefits tax
3,000
GST
3,989
Employees’ holiday pay
3,000
Employees’ wages — 5 employees for 2 weeks at $400 per week
4,000
Secretary’s salary — 3 weeks at $550 per week
1650
Managing director’s salary — 4 weeks at $900 per week
3,600
Sales commission
4,000
Liquidation expenses
80,000
Second mortgage on land and buildings
90,000
Liquidator’s remuneration
6,000
Instructions:
Show the order of priority of payment of debts for Master Ltd and calculate the amount payable to the company’s trade accounts payable.
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