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PROBLEM 5

The following data are taken from the statement of affairs of the John Company.

Assets pledged with fully secured creditors (realizable value, P190,000) P240,000
Assets pledged with partially secured creditors (realizable value, P90,000) P110,000
Free assets (realizable value, P102,000) P160,000
Fully secured creditor claims P91,000
Partially secured creditor claims P120,000
Unsecured creditor claims with priority P30,000
General unsecured creditor claims P350,000

What is the amount that will be paid to partially secured creditors?

a.P98,500
b.P103,500
c. P108,500
d. P109,500

Answer: B

Solution:

Realizable Value of all Assets (P190,000 + P90,000 + $102,000) P382,000
Allocated to:
Fully secured creditors (91,000)
Partially secured creditors (90,000)
Unsecured creditors with priority (30,000)
Remainder available to general unsecured creditors P171,000

Payment rate to general unsecured creditors
(Including balance due to partially secured creditors)
P171,000 / (P350,000 + (P120,000 - P90,000)) 45%


Amounts to be paid to:
Fully secured creditors P 91,000
Partially secured creditors [P90,000 + .45(P30,000)] 103,500
Unsecured creditors with priority 30,000
General unsecured creditors [.45(P350,000)] 157,500
Total P382,000







PROBLEM 6
Joseph. filed a voluntary bankruptcy petition on August 15, 2014, and the statement of affairs reflected the
following amounts:
Estimated
Book Current
Value Value
Assets
Assets pledged with full secured creditors P 900,000 P1,110,000
Assets pledged with partially secured creditors 540,000 360,000
Free assets 1,260,000 960,000
Total P2,700,000 P2,430,000

Liabilities
Liabilities with priority P 210,000
Fully secured creditors 780,000
Partially secured creditors 600,000
Unsecured creditors 1,620,000
Total P3,210,000

Assume that the assets are converted to cash at the estimated current values and the business is
liquidated. What amount of cash will be available to pay unsecured non-priority claims?

A. 720,000
B. 840,000
C. 960,000
D. 1,080,000

Answer: D

Solution:

Estimated current values of assets pledged with fully secured
creditors

P1,110,000
Add: Estimated current value of free assets 960,000
Total P2,070,000
Less Liabilities:
Full secured creditors P780,000
With priority 210,000 990,000
Total cash available for unsecured claims P1,080,000