The Details Below Were Extracted from the Accounting Records of Great

question 31

Multiple Choice

The details below were extracted from the accounting records of Great South East Ltd (a company in the process of liquidation) .
$\begin{array}{ll}&\$\\40000 \$ 1 \text { preference shares fully paid } & 40000 \\ 120000 \$ 1 \text { ordinary shares paid to } 50 \text { cents } & \underline{60000} \\ & \underline{100000}\\\\ \text { Cash available (after payment of all creditors) }&10000\end{array}$


Assume that the constitution of Great South East Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
What will be the deficiency or surplus apportioned to preference shareholders?

• A) A surplus of $22 500
• B) A deficiency of $22 500
• C) A surplus of $67 500
• D) A deficiency of $67 500

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Definitions:

Cathode

An electrode through which electrons move outwards in a circuit; often associated with the reduction process in electrochemical reactions.

Electrolyte

A chemical compound that, when melted or dissolved in water or another solvent, dissociates into ions and becomes capable of conducting electricity.

Rectification

The process of converting alternating current (AC) to direct current (DC) using diodes or other rectifying devices.

Direct Current

Electrical current that flows only from zero to positive and does not alternate negative and positive as AC does; the type of current created by the use of a battery.