🇳🇬 PATRIOT ODUNARO BABATUNDE JIMOH
59
TUTORIAL QUESTIONS on
acc
416-EXECUTORSHIP, BANKRUPTCY AND LIQUIDATION
(CONTACT
PATRIOT FOR SOLUTIONS ON 08038454008)
TOPIC 1:
BANKRUPTCY, COVERING BASIC CONCEPTS, CAUSES OF
BANKRUPTCY AND LIQUIDATION PROCEDURES.
- On
31st March 2025, Ajimatanraeje Nigeria Limited decided to go into
voluntary liquidation based on a unanimous resolution passed by its
members in their last annual meeting.
The
following was the company`s trial balance as at that date.
Additional
Information:
i.
The company`s assets are estimated to produce as follows:
N
Freehold
Properties 187,400
Plant
and Machinery 138,900
Investments 24,100
Inventory
and Work in progress 62,700
Debtors:
Goods 35,000
Doubtful 18,000
Bad 5,400
ii.
The doubtful debts are estimated to realise 331/3 kobo in the naira while the
call in arrears failed to produce.
iii.
The Creditors include preferential claims of N30,000
iv.
The estimated costs and expenses of the liquidation are legal N10,000 ;
liquidator`s remuneration N5,000 plus 5% of the amount distributed to members.
v.
The debenture interest has been paid to date.
vi.
The preference share capital plus the arrears of dividend to date of winding up
are to be settled at a premium of 3 kobo per share before the ordinary shares.
vi.
The bank overdraft has a floating charge on the assets of the company.
Required:
(a)
Section 509(1) of CAMA 1990 stated the categories of persons who cannot be
appointed Receivers or Managers of a company in liquidation. Give seven
examples of persons not qualified to be so appointed.
(b)
Prepare the statement of affairs and deficiency account as at 31st March, 2025
2. Alajeju Nigeria Limited went into voluntary
liquidation on 30 June 2024. At this date the company’s Statement of Financial
Position was as stated below:
Liabilities N’000
10%
preference shares of N1 each 36,000
Ordinary
shares of N1 each 60,000
5%
debenture 18,000
Creditors 30,900
144,900
Assets:
Plant
and machinery 60,000
Stock 30,000
Debtors 45,000
Profit
or Loss Account 9,000
Cash
at bank 900
144,900
Additional
information:
i.
The debentures were secured by a
floating charge on the assets of the company, the interests have been paid to
date.
ii.
The liquidator sold the Plant and
machinery as well as stock for N86,250,000 and realised all the debtors except
one of N8,340,000 which proved to be irrecoverable. The admitted claims of all
the creditors include N5,000,000 which have preferential claims.
iii.
Expenses of the liquidation amounted to
N852,000 and the debentures were repayable on 31 December, 2024. The
liquidator’s remuneration was agreed at 5% of the amount realised and 3% of the
amount distributed.
iv.
On the winding up, the preference shares
carried the rights to be repaid their capital in priority to the ordinary
shares and also to be paid arrears of dividends up to the date of commencement of winding up. The dividend on
the preference shares had been paid up to June 2024.
Required:
(a) Prepare
the Liquidator’s Final Accounts and show all the notes to the
accounts(workings)
(b) Section
509(1) of CAMA 1990 stated the categories of persons who cannot be appointed
Receivers or Managers of a company in liquidation. Give six examples of persons
not qualified to be so appointed.
3. Odebeodero and Co Limited went into voluntary
liquidation on 31st December 2024. The
following are extracted from its books on that date:
|
|
|
|
|
N
|
|
N
|
|
Capital:
|
|
Building
|
1,500,000
|
|
500,000 Ordinary Shares of N10 each
|
5,000,000
|
Plant and Machinery
|
2,100,000
|
|
Debenture (Secured by Floating Charge)
|
2,000,000
|
Inventory
|
950,000
|
|
|
Book Debt
|
750,000
|
|
Bank Overdraft
|
300,000
|
Provisions
|
(100,000)
|
|
Creditors
|
400,000
|
Call in Arrears
|
1,000,000
|
|
|
Cash in hand
|
100,000
|
|
|
Profit and Loss account
|
1,400,000
|
|
7,700,000
|
|
7,700,000
|
Plant
and Machinery and Building are valued at N1,500,000, and N1,200,000,
respectively. On realization, losses of N150,000 are expected on Inventory.
Book-Debts will realize N700,000. Calls-in- arrear are expected to realize 90%.
Bank Overdraft is secured against Buildings. Preferential Creditors for taxes
and wages are N60,000 and Miscellaneous expenses outstanding N20,000.
You
are required to prepare a statement of Affairs to be submitted to the meeting
of creditors.
4.a. Define bankruptcy and distinguish
it from insolvency.
b. Explain four (4) major causes
of bankruptcy among corporate organizations.
5. Discuss the major procedures involved in corporate
liquidation under the bankruptcy process.
6. Explain the differences between voluntary and compulsory
liquidation.
7. The following information relates
to XYZ Limited, which is declared bankrupt:
|
Particulars
|
₦
|
|
Cash in hand
|
80,000
|
|
Accounts receivable
|
220,000
|
|
Inventory
|
300,000
|
|
Plant and equipment (book value)
|
500,000
|
|
Land and building
|
400,000
|
|
Secured creditors (bank loan secured by land and building)
|
350,000
|
|
Preferential creditors (tax and wages)
|
120,000
|
|
Unsecured creditors
|
600,000
|
|
Liquidation expenses
|
50,000
|
|
Realization value: Land & building ₦360,000; Plant
₦300,000; Inventory ₦200,000; Debtors ₦180,000
|
|
Required:
Prepare a Statement of Affairs
to determine the expected return to unsecured creditors.
8. Identify and explain five (5) roles of a liquidator in the
bankruptcy process.
9. A company in liquidation has the
following liabilities and asset realizations:
|
Particulars
|
₦
|
|
Secured creditors
|
500,000
|
|
Preferential creditors
|
150,000
|
|
Unsecured creditors
|
700,000
|
|
Share capital
|
400,000
|
|
Assets realized
|
1,000,000
|
|
Liquidation expenses
|
50,000
|
Required: Determine how much each class of
creditor will receive.
TOPIC 2: DEEDS OF ARRANGEMENT IN RELATION TO SCHEME OF
ARRANGEMENT AND PROPERTY AVAILABLE FOR DISTRIBUTION.
10. a. Define a Deed of Arrangement and explain its main objectives.
b. Identify and explain
three (3) key features of a Deed of Arrangement.
11, Discuss the relationship between a Deed of Arrangement
and a Scheme of Arrangement, clearly distinguishing between the two
concepts.
12. Explain the procedures involved in executing a Deed of
Arrangement.
13. Enumerate and explain the types of property available for distribution
under a Deed of Arrangement.
14. State and explain five (5) advantages and five (5)
disadvantages of a Deed of Arrangement as an alternative to bankruptcy.
15. Write short notes on the roles of the trustee in a Deed of
Arrangement.
16. Discuss the importance of registration in the
validity of a Deed of Arrangement.
17. Explain briefly how a Deed of Arrangement differs from bankruptcy
proceedings in terms of purpose and legal effect.
TOPIC 3: THE ROLES OF OFFICIAL
RECEIVER, TRUSTEE AND CLASSES OF
CREDITORS
18. Explain the role of the
Official Receiver in bankruptcy and liquidation proceedings.
19. Discuss the main duties
and responsibilities of a Trustee in bankruptcy or liquidation proceedings.
20. Identify and explain the various classes of creditors in bankruptcy
and liquidation proceedings.
21. Explain the relationship
between the Official Receiver, the Trustee, and the Creditors during bankruptcy
proceedings.
22. Discuss the order of
priority in the payment of creditors in a bankruptcy or liquidation process.
23. Explain any four ethical responsibilities of a Trustee in the
performance of his duties.
TOPIC 4: PROCESS OF LODGING AND PAYMENT OF DEBT IN
BANKRUPTCY
AND LIQUIDATION.
24. Explain
the meaning of “lodging or proving of debt” in bankruptcy and liquidation, and
outline the steps involved in the process.
25. State
and explain the order of priority in which debts are paid during bankruptcy or
liquidation proceedings.
26. Describe
the roles of the official receiver or liquidator in the process of lodging and
payment of debts.
27. Explain any four rights of creditors during the process of lodging and
payment of debt in bankruptcy and liquidation.
28. A liquidator realizes ₦2,000,000 from the sale of the company’s assets.
The following claims are presented:
|
Particulars
|
₦
|
|
Liquidator’s remuneration
|
100,000
|
|
Legal expenses
|
50,000
|
|
Taxes due to FIRS
|
150,000
|
|
Employees’ salaries (3 months)
|
200,000
|
|
Secured creditor (mortgage on
plant)
|
500,000
|
|
Unsecured creditors
|
1,200,000
|
Required:
Compute how the ₦2,000,000 will be distributed among the creditors.
29. During bankruptcy proceedings, the trustee realizes ₦1,200,000 from the
bankrupt’s estate. The following claims were proved:
|
Particulars
|
₦
|
|
Trustee’s expenses
|
100,000
|
|
Taxes
|
80,000
|
|
Rent owed (preferential)
|
40,000
|
|
Secured creditor
|
300,000
|
|
Unsecured creditors
|
900,000
|
Required:
Calculate:
(a) Total amount available for unsecured creditors
(b) The rate of dividend payable to unsecured creditors.
30. Discuss how the process of
lodging and payment of debts promotes fairness and transparency in bankruptcy
and liquidation proceedings.
TOPIC 5: PREPARATION OF STATEMENTS OF AFFAIRS,
DEFICIENCY/SURPLUS
ACCOUNTS AND LIQUIDATORS ACCOUNTS. EXECUTORSHIPS
INCLUDING DESCRIPTION AND BASIC CONCEPTS, WILLS AND
EXECUTOR.
31. Explain the purpose of a Statement of Affairs in bankruptcy or
liquidation proceedings.
32. Distinguish
between a Statement of Affairs and a Balance Sheet.
33. State
the main components of a Deficiency or Surplus Account and explain its purpose.
34. Explain
the purpose of the Liquidator’s Account.
35. Define
an Executorship and explain the term “Executor.”
36. What
is a Will and what are its essential elements?
37. The
following information relates to the bankruptcy of Mr. Ade:
|
Particulars
|
₦
|
|
Cash
|
5,000
|
|
Debtors (expected to realize
₦40,000)
|
60,000
|
|
Stock (expected to realize
₦25,000)
|
30,000
|
|
Furniture (expected to realize
₦10,000)
|
15,000
|
|
Mortgage on property (realizing
₦50,000)
|
30,000
|
|
Creditors: Unsecured
|
70,000
|
|
Wages owing
|
5,000
|
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Capital
|
75,000
|
Prepare:
(i) Statement of Affairs
(ii) Deficiency Account
38. From
the following data, prepare a Liquidator’s Final Statement of Account.
|
Particulars
|
₦
|
|
Sale of assets
|
500,000
|
|
Liquidator’s remuneration
|
25,000
|
|
Preferential creditors
|
30,000
|
|
Unsecured creditors
|
270,000
|
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Debentures (secured on assets)
|
100,000
|
|
Share capital (ordinary)
|
200,000
|
39. Explain
the main differences between Liquidator’s Accounts and Executor’s Accounts.
TOPIC 6: TRUST COVERING DEFINITION, RELEVANT CONCEPTS,
BOARD OF
TRUSTEES AND COMMITTEE OF INSPECTION. ADMINISTRATION OF
INSOLVENT ESTATES, TRUSTS AND ESTATES OF DECEASED PERSON.
40. Define a trust and explain the essential elements required for its
validity.
41. Explain the roles and duties of a trustee in
the administration of a trust.
42. Describe
the composition and functions of a Board of Trustees.
43. Explain
the concept of a Committee of Inspection and outline its main functions in
insolvency administration.
44, Explain
the process of administering an insolvent estate.
45. Discuss
the process of administering the estate of a deceased person.
46. Differentiate
between Trusts and Estates of Deceased Persons.
47. Highlight
the main accounting records maintained in the administration of trusts and
estates.
48. State
five (5) differences between the Board of Trustees and the Committee of
Inspection.
49. Explain
how insolvency affects the administration of estates.
TOPIC 7: DEEDS OF ARRANGEMENTS, DISPOSITION OF
PROPERTY BY WILLS
AND LETTERS OF ADMINISTRATION; AND PREPARE ACCOUNTS
RELATING TO THE ADMINISTRATION OF INSOLVENT ESTATES AND
TRUSTEESHIP.
50. Explain the meaning and essential features of a Deed of Arrangement.
Discuss the advantages and disadvantages of using a Deed of Arrangement in
insolvency administration.
51. Differentiate between a
Will and Letters of Administration. State the legal conditions for a valid
Will.
52. Enumerate and explain the
order of priority for the payment of debts in the administration of an
insolvent estate.
53. Explain the nature and
functions of a trustee in the administration of estates and trusts. State at
least five duties of a trustee.
54. Discuss the key components
of the accounts to be prepared during the administration of an insolvent
estate.
55. Explain the legal and
accounting significance of “Probate” and “Letters of Administration” in estate
management.
56. Identify and explain the types of Deeds of Arrangement recognized in
insolvency administration.
57. State and explain five
factors that can render a will invalid.
58. Briefly explain the role and responsibilities of the Executor or
Administrator in estate management.
59. Explain why it is
important for trustees and administrators of insolvent estates to prepare
periodic accounts.
