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Hbc2204:Bankruptcy Accounts Question Paper
Hbc2204:Bankruptcy Accounts
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2012
QUESTION ONE (30 MARKS)
A creditor of Maua Traders, a partnership owned by Mukindia and Kiraitu presented a petition in bankruptcy against the partnership on 1 April 2011. On 30 April, 2011 the High Court made out a Receiving order against the partnership and the two partners.
The balance sheets of the partnership and the individual partners as at 30 April were as follows;
Maua Mukindia Kiraitu Maua Mukindia Kiraitu
Assets sh sh sh. Liabilities sh. Sh. Sh.
‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’
Land and 12,450 bank overdraft 4,600 Buildings Houses 5,500 4,800 creditors 27,270 670 450 Plant and 14,600 long term 11,200 3,300 3,840 Equipment loans Furniture, etc 650 400 car loans 380 600 Inventory 19,600 excess of Trade 20,240 assets over 24,000 15,990 15,550 Receivables liabilities Cash 180 90 140
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Investments 13,600 14,200 Motor cars 500 900 67,070 20,340 20,440 67,070 20,340 20,440 Additional information 1) Mukindia and Kiraitu have contributed equal amounts of capital to the partnership; always draw the same amount from the partnership and share profits and losses equally. The partners’ capital included in their personal assets under the title investments, 2) The estimated realizable values of the assets stated above are as follows: Maua Mukindia Kiraitu Assets Sh ‘000 sh ‘000’ sh.’000’ Land and buildings 8,000 Houses 4,000 3,500 Plant and equipment 7,500 Furniture 180 100 Inventory 13,500 Trade receivables 13,100 Other investments 700 1,000 Motor cars 250 300
3) The long term loan in the books of the partnership is secured on the partnership land and buildings. The long term loan to the individual partners are secured on the individual partner’s houses. The partnership overdraft was secured by a second mortgage on the partnership land and building and by the personal guarantee of Kiraitu and the deposit of his investments. The car loans are secured on the partners’ car individually. 4) Of the creditors of Maua, Mukindia and Kiraitu, preferential creditors amounted to sh. 20,000, sh.590,000 and sh.380,000, respectively, and represent amounts due for taxation. Required; Prepare statements of Affairs and Deficiency or surplus Accounts for the partnership and for individual partners, using the format laid down in the Bankruptcy Act and showing the legal position. (30 Marks)
QUESTION TWO (20 MARKS) a) Explain the duties and rights of a trustee in bankruptcy. (10 Marks) b) Explain the main winding up methods for accompany. (10 Marks)
QUESTION THREE (20 MARKS) Explain the following terms as used in accounting a) Internal reconstruction b) External reconstruction c) Corporate reorganization d) Liquidation
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QUESTION FOUR (20 MARKS) Matatizo Ltd went into voluntary liquidation on 30 November 2010. Its balance sheet as at that date was as follows;
Assets sh. Land and buildings 5,000,000 Plant and machinery 12,500,000 Patents 2,000,000 Stock 2,750,000 Sundry debtors 5,500,000 Cash at bank 1,500,000 Profit and loss account balance 5,625,000 34,875,000
Equity and liabilities Issued and subscribed capital 10,000,000 100,000 10% cumulative preference shares of sh.100 each fully paid 50,000 equity shares of sh. 100 each, 3,750,000 Sh.75 paid. 150,000 equity shares of sh.100 9,000,000 each, sh.60 paid 15% debentures secured by 5,000,000 Floating charge Interest outstanding on debentures 750,000 Creditors 6,375,000
Additional information: 1) Preference dividends were in arrears for two years and the creditors included preferential creditors of sh.760,000. 2) The assets were realized as follows; Sh. Land and building 6,000,000 Plant and machinery 10,000,000 Patents 1,500,000 Stock 3,000,000 Sundry debtors 4,000,000
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3) Liquidation expenses amounted to sh.545,000. The liquidator is entitled to a commission of 3% 4) The final payments (including those relating to debentures) were made on 31 May 2011.
Required; The liquidators final statement of account as at 31 May 2011. (20 Marks)
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