Practice for Corporate liquidation

Cam Corp. experienced a large operating loss in 2011 and the first half of 2012. By July 2012 its account payable were overdue, and its accoun
had been pledged to support a bank loan that was in default. Cam creditors were unwilling to extend additional credit or to ammend the terms
their loans, and on August 1, 2012 Cam filed a voluntary pettion for bankruptcy. The following balance sheet was prepared at the filing bankcr
On 1 August 2012 Cam corporation was transferred to the Cam Cor
CAM CORPORATION BALANCE SHEET, AUGUST 1, 2012
Assets
The following transactions occur during the month of August:
Cash
3000
1. Unrecorded utility bill for $500 is received.
Marketable securities(at market)
7000
2. Intangible assets are written off.
Account Receivable-net amount
25000
3. All inventory items are sold for $48000 of which $18000 is still on accoun
Inventories
50000
4. The equipment is sold for $14200 cash
Prepaid expenses
4000
89000
5. Wages and property taxes owed are paid
Land
15000
6. Land and Building are sold for $64000 cash, and the mortgage payable a
Building-net
40000
paid
Equipment-net
30000
7. Insurance policies included in prepaid expenses are canceled, and $1000
Intangible Assets
6000
91000
8. Account Receivable of $21000 are colllected and the remaining $4000 is
Total Assets
180000
cash received is applied to pay the bank note and related interest.
Liabilities and Stockholders' Equity
9. Estate adminstration fees of $3000 are paid.
Account payable
65000
10. Trustee fees of $2000 are acrued.
Wages payable
13000
During September 2012:
Property taxes payable
2000
1. The trustee collected the $18000 account receivable.
Notes payable-bank
25000
2. Marketable securities are sold for $7300, Supplies included in Prepaid ac
Notes payable- suppliers
5000
the remaining Prepaid account are written off.
Interest payable
7000
117000 Upon liquidation, the trustee's fee is paid in full. The remaining cash i
Mortage payable
50000 liabilities according to payment priorities and the ratio of their remain
Total Liabilities
167000 Instructions:
Stockholders' Equity
a. Prepare the journal entries to transfer the Cam Corp. to the Trustee book.
Capital Stock (100000 shares)
200,000
b. Prepare Statement of Affair on August1 1, 2012.
Retained Earnings
-187000
c. Prepare all the journal entries for August 2012 transactions.
Total stockholders' equity
13000
d. Prepare the statement of Cash Receipts/Disbursements, Balance sheet, S
Total Liabilities & Stockholders' Equity
180000
in estate equity, Statement of Realization and Liquidation for the mo
e. Prepare the journal entries for the month of September 2012.
Note: Mortgage is secured by Land Buidings as collateral.
f. Prepare the journal entries to close Cam Corporation.
Partially secured creditors are Notes from Bank. Priority Payable

are Wages and taxes. The remaining payables are unsecured.

g. Calculate the liquidation value/share upon the closing of Cam Corporation

overdue, and its account receivable

to ammend the terms of any of
ared at the filing bankcruptcy date.
erred to the Cam Corporation in Trusteeship.
onth of August:

18000 is still on account.

he mortgage payable and related interest are

re canceled, and $1000 cash refund is received.

the remaining $4000 is written off and the
and related interest.

included in Prepaid account are sold for $995,

The remaining cash is distributed to all unpaid

ratio of their remaining balances.

rp. to the Trustee book.

nsactions.
ments, Balance sheet, Statement of Changes
Liquidation for the month of August, 2012.
mber 2012.

sing of Cam Corporation.

Pada saat tutup trustee

Account payable
Wages payable
Property taxes payable
Notes payable-bank
Notes payable- suppliers
Interest payable
Mortage payable
Capital stock (100000 shares)

65000
13000
2000
25000
5000
7000
50000
200000
367000

Cash
Marketable securities(at market)
Account Receivable-net amount
Inventories
Prepaid expenses
Land
Building-net
Equipment-net
Intangible Assets
Retained earnings

3000
7000
25000
50000
4000
15000
40000
30000
6000
187000
367000

Statement of Affairs on August 1, 2012

Asset
Book Value
Estimated Realizable
Value less secured
creditor liabilities
Pledged for fully secured creditors
55000 Land and buildings-net
60000
Lesss : Mortgage payable
50000
Interest payable
5000
55000
Pledged for Partially Secured Creditors
25000 Accounts Receivable
Less : Note payable to bank
Interest payable
Available for priority and unsecured creditors
3000 Cash
7000 Marketable securities
50000 Inventories
4000 Prepaid expenses
30000 Equipment-net
6000 Intangible assets
total available for priority and unsecured

22000
25000
2000

27000

creditors
Less: priority liabilities
total available for unsecured creditors
Estimated deficiency
180000
Liabilities and Stockholder's equity
Secured and
Priority Claims

Book Value
Fully Secured Creditors
50000 Mortgage payable
5000 Interest payable

50000
5000

Partially Secured Creditors

25000 Note payable-bank
2000 Interest payable
Less: Accounts receivable pledged
Priority liabilities
13000 Wages payable
2000 Property tax payable

25000
2000
27000
22000

13000
2000
15000

Unsecured creditors
65000 Accounts payable
5000 Notes payable to suppliers
Stockholder's Equity
200000 Capital stock
-187000 Retained earnings
180000

Journal During September 2012 :

Cash
18000
Accounts receivable
Cash
7300
Marketable securities
Estate equity
Cash
995
Estate equity
2005
Prepaid expense

18000
7000
300

3000

Closed :
Accounts payable
Utilities payable
Note payablebank
Notes payablesuppliers
Estate equity

Pada saat buka trustee

Cash
Marketable securities(at market)
Account Receivable-net amount
Inventories
Prepaid expenses
Land
Building-net
Equipment-net
Intangible Assets
Account payable
Wages payable
Property taxes payable
Notes payable-bank
Notes payable- suppliers
Interest payable
Mortage payable
Estate equity

, 2012

mated Realizable
ue less secured
ditor liabilities

Estimated realizable
value available for
unsecured creditors

5000

3000
7000
55000
0
12000
0

3000
7000
25000
50000
4000
15000
40000
30000
6000
180000
65000
13000
2000
25000
5000
7000
50000
13000
180000

suppliers

82000
15000
67000
8000
75000
Unsecured
Nonpriority claims

5000

65000
5000

75000

11050
85
1020
850
13005

Journal entry August:

Estate equity
Utilities payable
Estate equity
Intangible asset

500
500
6000
6000

Cash
Account receivable
Estate equity
Inventory

30000
18000
2000

Cash
Estate equity
Equipment

14200
15800

Wages payable
Property taxes payable
Cash

13000
2000

Cash
Land
Building
Estate equity
Mortgage payable
Interest payable
Cash

50000

Cash
Prepaid expenses

30000

Cash
Estate equity
Accounts receivable
Estate equity
Cash

15000
Estate equity
Trustee's fee payable

Balance,August 1, 2012
Inventory items sold
Equipment sold
Land and building sold
Insurance refund
Accounts receivable
Balance, August 31, 2012

Utility bill discovered

Intangibles written off
Inventory loss
Equipment loss
Accounts receivable written off
Administrative expenses
Trustees fee

Statement of cash receipt/disbursement

CASH
3000
30000
Wages and property taxes
14200
Mortgage and interest payment
64000
Bank notes and interest
1000
Administrative expenses
21000
Balance forward
133200
39200
Statement of changes in estate equity
ESTATE EQUITY (DEFICIT)
500
August 1, 2012, balance
6000
Land and building gain
2000
15800
4000
3000
2000
Balance forward (deficit)
33300

August 31, 2012

11300
BALANCE SHEET
ON AUGUST 31,2012

Assets
Cash
Marketable securities
Accounts receivablenet
Prepaid expenses
Total assets
Liabilities and Deficit
Accounts payable
Utilities payablediscovered
Trustees fee payablenew
Note payablebank (unsecured portion)
Notes payablesuppliers
Total liabilities
Less: Estate deficit
Total liabilities less deficit

39,200
7,000
18,000
3,000
67,200
65,000
500
2,000
6,000
5,000
78,500
11,300
67,200

STATEMENT OF REALIZATION AND LIQUIDATION

AUGUST 1, 2012, TO AUGUST 31, 2012
Assets
Assets to Be Realized [Noncash
Assets Realized [Proceeds from sale,
assets at August 1]
disposal, or write-off]
Marketable securities
7,000
Accounts receivable
Accounts receivable
25,000
Inventories
Inventories
50,000
Prepaid expenses
Prepaid expenses
4,000
Land and building
Land
15,000
Equipment
Building
40,000
Intangible assets
Equipment
30,000
Intangible assets
6,000
177000
Assets Acquired [New noncash
Assets Not Realized [Noncash assets at
assets received]
August 31]
Accounts receivablenew
18000
Marketable securities
Prepaid expenses
Accounts receivablenew
Liabilities
Liabilities to Be Liquidated [Liabilities
Liabilities Liquidated [Amounts paid
at August 1]
on liabilities]
Accounts payable
65,000
Wages payable
Wages payable
13,000
Property taxes payable
Property taxes payable
2,000
Note payablebank
Note payablebank
25,000
Interest payable

Notes payablesuppliers
Interest payable
Mortgage payable
Liabilities Incurred or Discovered
[Amounts incurred or discovered
but unpaid at August 31]
Liability discovered for utilities
Trustees fee payablenew

Supplementary Expenses [Expenses

excluding asset losses and
write-offs]
Liability discovered for
utilities
Trustees fee
Administrative expenses-new

5,000
7,000
50,000

Mortgage payable
167000

Liabilities Not Liquidated [Liabilities

at August 31]
Accounts payable
Note payablebank
Notes payablesuppliers
500
Liability discovered for
2000
2500
utilities
Trustees fee payable- new
Income or Loss and Supplemental Items
Supplementary Revenues [Revenues
excluding gains on assets or
liability settlements]
None
500
Net Loss
2000
3000
5500
370000

64000
15000
40000
9000
50000
5000

(kapa 5rbu?)
55000

1000
1000
21000
4000
25000
3000
3000
2000
2000

15000
55000
21000
3000
39200
133200

est payment

13000
9000

11300
33300

ATION
12

oceeds from sale,

$21,000
48,000
1,000
64,000
14,200
none

148200

7,000
3,000
18,000

28000

d [Noncash assets at

d [Amounts paid
13,000
2,000
19,000
7,000

50,000

91000

dated [Liabilities
65000
6000
5000
500
2000

78500

ms
venues [Revenues

24300

370000

Estate equity
Utilities Payable
Estate equity
Intangible assets

500
500