Record all the transactions associated with the sale.
Penrith European Car Sales plc sells a new car with “free” 5,000km and 20,000km maintenance services for a combined price of £41,500. The cost of the car from the manufacturer is £30,000. The two maintenance services normally cost £400 and £600 to do and are charged to casual customers at the rate of £800 and £1,200 respectively. Record all the transactions associated with the sale.
Supporting information:
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The freehold land has a market value of £960,000 if it is to be continued in use as a warehouse. There is a possibility that planning permission could be obtained for a change of use allowing the warehouse to be converted into apartments. If planning permission were to be obtained the company has been advised that the land would have a market value of £2,500,000.
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The net realisable values on liquidation of the other assets are:
• Plant and equipment • Inventory
• Trade receivables
£1,200,000 £450,000 £1,050,000
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An analysis of the payables indicated that there would be £300,000 owing to preferential creditors for wages, salaries and taxes.
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Liquidation costs were estimated to be £200,000.
Required:
Prepare a statement showing the distribution of liquidation proceeds to creditors and shareholders on the basis that:
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(a) Planning permission was not obtained; and
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(b) Planning permission was obtained
Hint: First, secured creditors will receive the liquidation proceeds of their secured assets, next preferential creditors will receive liquidation proceeds (if any), third unsecured creditors (and secured creditors for any excess claims) will share any remaining liquidation proceeds (if any). Lastly, any residual proceeds remaining once all creditors are repaid will be distributed to shareholders.
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