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- 20 Marks
BCL – L1 – Q100 – Legal implications relating to companies in difficulty or in crisis
Discuss issuing certificates to debenture holders, stages of involuntary liquidation, and characteristics of a floating charge.
Question
Kwame Asare believes that debenture holders, though not being shareholders, deserve to be issued certificates. This is because, without their funds, the company cannot survive.
Required:
Explain if you agree or disagree with Kwame Asare on his view on the issue of certificates to debenture holders.
(a) Identify FOUR (4) stages of involuntary liquidation and explain the consequence of each stage identified.
(b) Explain THREE (3) characteristics of a floating charge.
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- 20 Marks
BCL – L1 – Q95 – Legal implications relating to companies in difficulty or in crisis
Assess if selling all assets can cover liabilities for a struggling radio station.
Question
Kofi Amo set up a radio station, Amo FM, investing GH¢10,000 initial capital. After some years, the business is not successful. At the end of the fifth year, furniture and fixtures were worth GH¢5,000; the delivery van was valued at GH¢2,000, and Kofi lived in a small flat valued at GH¢50,000, which he owns. This house was mortgaged from Apex Finance, with an outstanding balance of GH¢40,000 to pay off the mortgage.
Now the business has hit hard times: rent for the office location has increased, and Kofi owes the landlord GH¢10,000; workers have not been paid for months, with salary arrears of GH¢7,000; the bank overdraft is GH¢15,000, and the bank has refused to extend it; Kofi has received a demand from the National Communication Authority to renew the license for GH¢8,000.
(a) If all of your assets were sold off, would you be able to meet all of your liabilities?
(b) What options do your creditors have? Is your home safe?
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- 20 Marks
BCL – L1 – Q73 – Types of Capital
Identify components of stated capital for a company with shares.
Question
(a). What are the components of stated capital of a company with shares?
(b). What treatment does the Act provide for unclaimed dividends?
(c). State five items that distinguish preference shares from ordinary shares.
(d). Tawiah Limited has been in business for over twenty years now. It was a family company before a private placement with some strategic investors five years ago with the goal of expanding production and venturing into the export market. The result has been less than impressive, and investors are demanding action. In response, the Managing Director (MD) intends to pay dividends for the first time since the private placement using a fund meant for debt payments due next month. One of the investors proposed an amount for the dividend per share, and the MD agreed just to appease the investors.
(i) Can he go ahead with the dividend payment?
(ii) What are the implications, if any?
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- 15 Marks
MA – L2 – Q16 – Budgetary control
Prepare a budgeted profit or loss statement for Kofi Limited for Q1, focusing on sales, inventory, and expenses.
Question
Kofi Limited retails fertilizer to farmers in Ghana. The company has approached its Bankers to provide funding for next year’s operations and a three-month master budget has been requested for review by the bankers.
You have been approached by the management as a consultant to prepare the 1st quarter budget for the banker’s consideration for its next year’s operations.
End of Accounting year December 20X9
| GH¢ | |
|---|---|
| Debtors | 23,000 |
| Bank balance | 55,000 |
| Non-current asset at cost | 698,000 |
| Provision for depreciation balance | 98,000 |
| Creditors Balance | 48,000 |
| Operating expenses for the month December | 60,000 |
| Sales for the month of December 20X9 | 400,000 |
| December Ending inventory | 20,000 |
| Retained earnings | 120,000 |
The following additional information was also provided to assist your work:
(i) Depreciation is provided at the rate of 5% on cost of non-current assets.
(ii) Closing inventory is expected to increase by GH¢2,000 in January from December levels. This is expected to increase by the same figure in February from the projected figure in January. It is expected that in March closing inventory is desired to be GH¢26,000.
(iii) The company makes a profit of 25% on its sales.
(iv) Operating expenses are expected to increase by 10% from that of December, and this is projected to increase at the same growth rate to March.
(v) Sales are projected to grow by 15% from December until March.
(vi) The Debtors figure is desired to be proportional to the sales values.
(vii) Creditors value for the three months are expected to be as follows: January – GH¢50,000; February – GH¢46,000; and in March – GH¢52,000.
You are required as a consultant for Kofi Company Limited to prepare for their Bankers:
(a) The budgeted statement of profit or loss for the three months.
(b) The budgeted statement of financial position for the three months.
(c) The cash budget for the three months.
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