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7 Feb 2019
The following is the abridged statement of the financial position of Cromwell Ltd
Assets Non-current assets Land & buildings 500,000 Current assets Cash & cash equivalents 12,000 Total assets 512,000 Equity & Liabilities Total equity (130,000) -Issued capital 320,000 Accumulated loss (450,000) Current laibilities Trade payables 642,000 Total equity & Liabilities 512,000
Additional information:
- A reasonable market value for the assets is equal to the book values
- The creditors are prepared to enter into a compromise in order to prevent liquidation
- There is a predicted future profit of $300,000 per annum
- The tax rate is 30%
- The shareholders have indicated that they are considering buying the land and buildings if Cromwell is liquidated
Determine whether Cromwell Ltd should be liquidated or whther the company should rather perform a reconstruction. Show all calculations
The following is the abridged statement of the financial position of Cromwell Ltd
| Assets | |
| Non-current assets | |
| Land & buildings | 500,000 |
| Current assets | |
| Cash & cash equivalents | 12,000 |
| Total assets | 512,000 |
| Equity & Liabilities | |
| Total equity | (130,000) |
| -Issued capital | 320,000 |
| Accumulated loss | (450,000) |
| Current laibilities | |
| Trade payables | 642,000 |
| Total equity & Liabilities | 512,000 |
Additional information:
- A reasonable market value for the assets is equal to the book values
- The creditors are prepared to enter into a compromise in order to prevent liquidation
- There is a predicted future profit of $300,000 per annum
- The tax rate is 30%
- The shareholders have indicated that they are considering buying the land and buildings if Cromwell is liquidated
Determine whether Cromwell Ltd should be liquidated or whther the company should rather perform a reconstruction. Show all calculations
Beverley SmithLv2
9 Feb 2019
