Professional Documents
Culture Documents
B
C
A
D
C
16.
17.
18.
19.
20.
D
B
D
A
D
A
B
A
C
C
21.
22.
23.
24.
25.
21.
22.
23.
24.
25
A
C
A
C
B
26.
27.
28.
29.
30.
C
B
C
D
C
D
B
A
C
D
16.
17.
18.
19.
20.
B
A
B
B
C
26.
27.
28.
29.
30.
D
C
B
B
A
31.
32.
33.
34.
35.
36.
D
C
A
A
D
A
Solutions:
1. C Land and building at net selling price of 10,400,000
2. A Equipment at net selling price of 800,000
3. B
Solution:
Assets pledged to fully
secured creditors:
Land and building
Less: Loan payable
Interest payable
Realizable
value
10,400,000
(8,000,000)
(60,000)
160,000
668,800
400,000
40,000
1,640,000
-
228
Available for
unsecured creditors
2,340,000
2,908,800
5,248,800
4. D
Solution:
Unsecured liabilities with
priority:
Estimated admin. expenses
Accrued salaries
Current tax payable
Total unsecured
liabilities with priority
Fully secured creditors:
Loan payable
Interest payable
Partially secured creditors:
Note payable
Less: Equipment
Secured and
Priority claims
120,000
100,000
1,400,000
Unsecured liabilities
without priority
1,620,000
8,000,000
60,000
8,060,000
1,200,000
(800,000)
400,000
Accounts payable
Total unsecured
liabilities without priority
784,000
4,000,000
4,784,000
5,184,000
5,248,800
(1,620,000)
3,628,800
5,184,000
30%
1,555,200
229
5,248,800
(1,620,000)
3,628,800
5,184,000
70%
11. D
12. B
Solution:
Jan.
Cash
1,
Accounts receivable
20x1
Note receivable
Inventory
Prepaid assets
Land
Building
Equipment
Estate deficit (squeeze)
Accrued expenses
Current tax payable
Accounts payable
Note payable
Loan payable
160,000
880,000
400,000
2,120,000
40,000
2,000,000
8,000,000
1,200,000
684,000
884,000
1,400,000
4,000,000
1,200,000
8,000,000
13. A
Solution:
Assets to be realized is 14,640,000, equal to the total book value
of the assets, excluding cash, transferred to the receiver
(14,840,000 total assets less 160,000 cash).
14. C
Solution:
Assets acquired is 40,000, representing the previously unrecorded
interest receivable.
230
15. D
Solution:
Assets realized is equal to the actual net proceeds from the sale of
assets, as summarized below:
660,000
a. Collection of accounts receivable
400,000
b. Collection of note and interest receivables
1,180,000
c. Sale of half of the inventory
10,400,000
e. Sale of land and building
880,000
f. Sale of equipment
13,520,000
Assets realized
16. A
Solution:
Assets not realized is equal to the book value of the unsold
inventory of 1,060,000 (2,120,000 x 50%).
17. B
Solution:
Liabilities to be liquidated is 15,484,000, equal to the total book
value of the liabilities transferred by ABC Co. to the receiver.
18. A
Solution:
Liabilities assumed is 60,000, representing the previously
unrecorded interest payable.
19. C
Solution:
Liabilities liquidated is equal to the actual settlement amounts of
the liabilities settled, as summarized below:
100,000
g. Payment for accrued salaries
1,400,000
h. Payment for current tax payable
8,060,000
i. Payment for interest and loan payables
880,000
j. Payment for note payable
10,440,000
Liabilities liquidated
20. C
Solution:
Liabilities to be liquidated is equal to the total book value of the
unsettled liabilities summarized below:
784,000
Accrued expenses, net of accrued salaries
4,000,000
Accounts payable
4,784,000
Liabilities to be liquidated
231
21. B
Solution:
Debits
Assets to be realized,
excluding cash
Assets acquired
Credits
14,640,000 13,520,000
40,000
1,060,000
Liabilities liquidated
10,440,000 15,484,000
4,784,000
Supplementary expenses
Totals
Net gain - excess credits
over debits
Assets realized
60,000
Supplementary
income
30,012,000 30,124,000 Totals
108,000
112,000
Government - unsecured
liability with priority
XYZ Bank - fully secured
creditor
Alpha Financing Co. partially secured creditor
Mr. Bombay - unsecured
liability without priority
400,000
4,200,000
3,200,000
1,200,000
Recovery
percentage
100%
100%
2M + (1.2M x
40%*)
40%*
Estimated
recovery
400,000
4,200,000
2,480,000
480,000
232
1,248,000
(288,000)
(384,000)
(192,000)
384,000
25. C
Solution:
Estimated recovery percentage
of unsecured creditors without
priority
432,000
48,000
480,000
384,000
(480,000)
(96,000)
27. C
Solution:
Unsecured liability with priority
Fully secured creditor
288,000
384,000
Recovery
percentage
100%
100%
240,000
48K +
(48K x 58%)
230,400
432,000
80%
345,600
Claim
Total
Estimated
recovery
288,000
384,000
1,248,000
720,000
(1,280,000)
200,000
(120,000)
1,120,000
1,600,000
0.70
3,760,000
(3,640,000)
3,900,000
4,020,000
(1,200,000)
(1,280,000)
(560,000)
980,000
1,440,000
1,280,000
160,000
1,200,000
80,000
1,280,000
34. A
Solution:
Total assets at realizable value (1M + 20K dividend
1,020,000
receivable)
(1,328,000)
(308,000)
35. D
Solution:
Debits
Credits
Assets to be realized
Assets acquired
8,000,000
60,000
4,720,000
880,000
Liabilities liquidated
8,520,000
11,480,000
4,760,000
128,000
100,000
72,000
21,440,000
17,280,000
Supplementary expenses
Totals
4,160,000
235
Assets realized
Assets not realized
Liabilities to be
liquidated
Liabilities assumed
Supplementary
income
Totals
Net Loss excess
of debits over
credits
36. A
Solution:
ASSETS
Cash
Assets not
realized
TOTALS
400,000
(Squeeze)
880,000
1,280,000
(Start)
(3,480,000)
TOTALS
1,280,000
Exercises
1. Solution:
Book values
5,000,000
600,000
80,000
440,000
200,000
1,060,000
20,000
Realizable
values
ASSETS
Free assets:
Cash
Accounts receivable
Note receivable
Interest receivable
Inventory
Prepaid assets
Total free assets
Less: Unsecured liabilities
with priority (see below)
Net free assets
Estimated deficiency (squeeze)
80,000
334,400
200,000
20,000
820,000
-
(1,296,000 - 907,200)
50,000
700,000
1,170,000
7,400,000
Book values
Available for
unsecured
creditors
Realizable
values
236
1,454,400
2,624,400
(810,000)
1,814,400
388,800
2,592,000
Unsecured
non-priority
liabilities
4,000,000
600,000
392,000
2,000,000
(342,000)
7,400,000
Loan payable
Interest payable
4,000,000
30,000
600,000
(400,000)
Unsecured creditors
Accrued expenses, net of
accrued salaries
Accounts payable
Total unsecured creditors
Shareholders' equity
2. Solutions:
Requirement (a):
Jan.
Cash
1,
Accounts receivable
20x1
Note receivable
Inventory
Prepaid assets
Land
Building
Equipment
Estate deficit (squeeze)
Accrued expenses
Current tax payable
Accounts payable
Note payable
Loan payable
200,000
392,000
2,000,000
2,392,000
2,592,000
2,592,000
80,000
440,000
200,000
2,120,000
20,000
1,000,000
4,000,000
600,000
342,000
442,000
700,000
2,000,000
600,000
4,000,000
Requirement (b):
ASSETS
Assets to be realized:
Assets realized:
Accounts receivable
440,000 Accounts receivable
Note receivable
200,000 Note receivable
Inventory
1,060,000 Interest receivable
Prepaid assets
20,000 Inventory
Land and building
5,000,000 Land and building
Equipment, net
600,000 Equipment
7,320,000 Total
Total
237
330,000
180,000
20,000
590,000
5,200,000
440,000
6,760,000
Assets acquired:
Interest receivable
20,000
Liabilities liquidated:
Accrued expenses
Current tax payable
Interest payable
Loan payable
Note payable
Total
Inventory
530,000
LIABILITIES
Liabilities to be liquidated:
50,000 Accrued expenses
442,000
700,000 Current tax payable
700,000
30,000 Accounts payable
2,000,000
4,000,000 Note payable
600,000
440,000 Loan payable
4,000,000
5,220,000 Total
7,742,000
Liabilities assumed:
Interest payable
30,000
SUPPLEMENTARY ITEMS
Supplementary expenses:
Supplementary income:
Administrative
54,000
expenses
Net gain during the
56,000
period
15,062,000
15,062,000
Requirement (c):
Beg. bal.
Assets realized
Cash
80,000
6,760,000 5,220,000
54,000
1,566,000
Liabilities liquidated
Administrative expenses
3. Solution:
Claim
Government - unsecured
liability with priority
XYZ Bank - fully secured
creditor
Alpha Financing Co. partially secured creditor
Mr. Bombay - unsecured
liability without priority
200,000
Recovery
percentage
Estimated
recovery
100%
200,000
2,100,000
100%
2,100,000
1,600,000
500K + (300K
x 40%*)
1,240,000
600,000
238
40%*
240,000
624,000
(144,000)
(192,000)
(96,000)
192,000
108,000
12,000
120,000
192,000
(240,000)
(48,000)
Requirement (d):
Unsecured liability with priority
Fully secured creditor
144,000
192,000
Recovery
percentage
100%
100%
120,000
48K +
(24K x 58%)
115,200
216,000
80%
172,800
Claim
Estimated
recovery
144,000
192,000
624,000
Total
5. Solution:
Since only the results of the liquidation process are provided in the
problem, we need to reconstruct the information on assets and
239
1,880,000
(1,820,000)
1,950,000
2,010,000
(600,000)
(640,000)
(280,000)
490,000
(error) a
Deficiency of assets pledged to to partially secured
creditors [(1.040M-740K)-280K]
Total unsecured liabilities without priority
20,000
1,080,000
720,000
640,000
80,000
600,000
40,000
640,000
Credits
Assets to be realized
Assets acquired
4,000,000
30,000
2,360,000
440,000
Liabilities liquidated
4,260,000
5,740,000
2,380,000
64,000
241
Assets realized
Assets not realized
Liabilities to be
liquidated
Liabilities assumed
Supplementary expenses
Totals
50,000
36,000
10,720,000
8,640,000
2,080,000
Supplementary
income
Totals
Net Loss excess
of debits over
credits
Cash
Assets not
realized
440,000
Estate deficit
TOTALS
640,000
TOTALS
(Squeeze)
242
(1,740,000)
640,000
(Start)