Sox Ltd has two classes of ordinary shares: 100 000 fully paid A ordinary shares (paid-up share capital $100 000) and 25 000 fully paid B ordinary shares (paid-up share capital $100 000).The company was placed in liquidation.Liquidator's fees totaled $85 000, the assets were sold for $1 775 000 and these assets had a carrying amount of $1 600 000.
-B ordinary shareholders have preference for return of capital.Which of the following extract of entries is most likely to correctly show the members' distribution account of Sox Ltd assuming the preference is fully satisfied?
A)$\begin{array}{llcc}
\text { } & \text { Debit (\$)} &\text { Credit (\$)}\
\text { Members' distribution - A ordinary} &&100000\
\text {Members' distribution $- \mathrm { B }$ ordinary } &?\
\end{array}$

B)$\begin{array}{llcc}
\text { } & \text { Debit (\$)} &\text { Credit (\$)}\
\text { Members' distribution - A ordinary} &&?\
\text {Members' distribution $- \mathrm { B }$ ordinary } &&50000\
\end{array}$

C)$\begin{array}{llcc}
\text { } & \text { Debit (\$)} &\text { Credit (\$)}\
\text { Members' distribution - A ordinary} &?\
\text {Members' distribution $- \mathrm { B }$ ordinary } &100000\
\end{array}$

D)$\begin{array}{llcc}
\text { } & \text { Debit (\$)} &\text { Credit (\$)}\
\text { Members' distribution - A ordinary} &&?\
\text {Members' distribution $- \mathrm { B }$ ordinary } &&100000\
\end{array}$

Question

Sox Ltd has two classes of ordinary shares: 100 000 fully paid A ordinary shares (paid-up share capital $100 000) and 25 000 fully paid B ordinary shares (paid-up share capital $100 000).The company was placed in liquidation.Liquidator's fees totaled $85 000, the assets were sold for $1 775 000 and these assets had a carrying amount of $1 600 000.
-B ordinary shareholders have preference for return of capital.Which of the following extract of entries is most likely to correctly show the members' distribution account of Sox Ltd assuming the preference is fully satisfied?
A)$\begin{array}{llcc}
  \text {  } &   \text {  Debit (\$)} &\text {  Credit (\$)}\
 \text {  Members' distribution - A ordinary} &&100000\
 \text {Members' distribution $- \mathrm { B }$ ordinary  } &?\
\end{array}$

B)$\begin{array}{llcc}
  \text {  } &   \text {  Debit (\$)} &\text {  Credit (\$)}\
 \text {  Members' distribution - A ordinary} &&?\
 \text {Members' distribution $- \mathrm { B }$ ordinary  } &&50000\
\end{array}$

C)$\begin{array}{llcc}
  \text {  } &   \text {  Debit (\$)} &\text {  Credit (\$)}\
 \text {  Members' distribution - A ordinary} &?\
 \text {Members' distribution $- \mathrm { B }$ ordinary  } &100000\
\end{array}$

D)$\begin{array}{llcc}
  \text {  } &   \text {  Debit (\$)} &\text {  Credit (\$)}\
 \text {  Members' distribution - A ordinary} &&?\
 \text {Members' distribution $- \mathrm { B }$ ordinary  } &&100000\
\end{array}$

Quizplus · Accepted Answer

The B ordinary shareholders have a preference for the return of capital, which amounts to $100,000. After paying the liquidator's fees ($85,000) from the asset sale proceeds ($1,775,000), the remaining funds are $1,690,000. The B ordinary shareholders are entitled to their full paid-up share capital of $100,000 before any distribution to A ordinary shareholders.

Sox Ltd Has Two Classes of Ordinary Shares: 100 000