Professional Documents
Culture Documents
Chapter 6
Chapter 6
Problem I
1. Statement of Affairs - Formal
MINER COMPANY
Statement of Affairs
Value
10,000
Note Payable
Free Assets
6,000 Cash 6,000
61,000 Accounts Receivable 50,000
60,000 Inventory 30,000
1,100 Prepaid Insurance 400
Goodwill 0
8,500
Taxes 8,400
2,400
P 320,000 P 185,800
Book Unsecure
Value Equities d
P 6,000 P 6,000
Accrued Wages
4,200 P 5,800
Equipment
Unsecured Creditors:
170,000 Accounts Payable 170,000
10,000 Notes Payable 10,000
Stockholders Equity
110,000 Common Stock
( 50,000) Retained Earnings
(Deficit)
P 320,000 P 185,800
Deficiency Account
Equipment 9,000
Goodwill 8,500
P113,600 P 113,600
Problem II
1. Formal
Down Dog Corporation
Statement of Affairs
June 30, 2014
Deficiency
Account
Book Value Assets Realizable Value (Loss/Gain)
Pledged with partially secured creditors
P165,000 Equipment-net P87,000
Less: Note payable and accrued interest (96,000) P 0
Unsecured amount (See below) (9,000)
Free Assets
3,000 Cash 3,000
72,000 Accounts receivable-net 48,000 (24,000)
60,000 Inventories 72,000 12,000
Total net realizable value 123,000
Less: Priority liabilities wages payable (45,000)
Total available for unsecured creditors 78,000
______ Estimated deficiency to unsecured creditors 30,000 ______
P300,000 P108,000 (90,000)
Unsecured
Book Value Equities Liabilities
Priority liabilities
P 45,000 Wages payable (assumed under
P4,650 per employee) P 45,000
Unsecured creditors
72,000 Accounts payable 72,000
27,000 Rent payable 27,000
Stockholders equity
180,000 Capital stock 180,000
(120,000) Retained earnings (deficit) ______ (120,000)
P300,000 P108,000 P 60,000
Estimated Deficiency P(30,000)
Unsecured priority
Administrative expenses P24,000
Wages payable 45,000 69,000
Unsecured nonpriority
Accounts payable (P72,000 0.50 P36,000
Rent payable (P27,000 0.50) 13,500 49,500
Total payments P210,000
Problem III
Realizable value of all assets (P635,000 + P300,000 + P340,000)P1,275,000
Allocated to:
Fully secured creditors (316,000)
Partially secured creditors (300,000)
Unsecured creditors with priority (100,000)
Remainder available to general unsecured creditors P559,000
*Rounded P130
Problem IV
Free Assets:
Current Assets .................................................................. P 35,000
Buildings and Equipment ................................................. 110,000
Total ......................................................................... P145,000
Unsecured Liabilities
Notes Payable (in excess of value of security) ................. P 30,000
Accounts Payable ............................................................. 85,000
Bonds Payable .................................................................. 70,000
Total ......................................................................... P185,000
Problem V
Free Assets:
Cash ......................................................................... P30,000
Receivables (30 percent collectible).................................. 15,000
Inventory ......................................................................... 39,000
Land (value in excess of secured note:
P120,000 P110,000).................................................. 10,000
Total ......................................................................... P94,000
Unsecured Liabilities:
Accounts payable.............................................................. P90,000
Bonds payable (less secured interest in
building: P300,000 P180,000)................................... 120,000
Unsecured liabilities.................................................... P210,000
Problem VI
Total % of Total
Amounts Claims
Total Expected to Expected to
Creditors be be
Class of Creditors Claims Recovered Recovered
Fully secured liabilities 183,600 183,600 100.0
Partially secured liabilities 54,600 51,720 94.7
Unsecured liabilities with priority 30,810 30,810 100.0
Unsecured liabilities without priority 182,500 116,800 64.0
Problem VII
1. Total estimated proceeds P910,000
Less asset proceeds claimed by secured
creditors:
Notes payable and interest (from
proceeds of receivables and inventory) P150,000
Mortgage payable and interest (from
proceeds of land and building) 320,000 470,000
Total available to unsecured claimants. P440,000
Less distributions to unsecured claims
with priority:
Wages payable P 10,000
Taxes payable 20,000 30,000
Amount available for unsecured claims P410,000
Problem VIII
1.
WILBUR CORPORATION
STATEMENT OF AFFAIRS
DECEMBER 31, 20x4
Assets
Estimated
Amount Estimated
Estimated Available to Gain
Current Unsecured (Loss) on
Book Value Values Claims Realizatio
n
(1) Assets pledged with fully
secured
creditors:
P 40,000 Accounts receivable (net) P 40,000
Less: 10% note payable and
interest 38,500 P 1,500
Problem IX
Smith Company
Statement of Realization and Liquidation
Assets
Assets to be realized Assets Realized
Supplementary Items
Supplementary Charges Supplementary Credits
Liabilities
Liabilities Liquidated Liabilities to be Liquidated
9. d
= P93,000
13. a
15. c
Statement of Realization and Liquidation
P 8,825,000 P 9,250,000
16. No requirement
17. c
Total Liabilities (refer to Liabilities not liquidatedNo. 14) P1,700,000
+: Stockholders Equity (P1,500,000 P500,000) 1,000,000
Total LSHE = Total Assets P 2,700,000
-: Noncash assets (refer to Assets not realized-No. 14). 1,375,000
Cash balance, endingP1,325,000
18. P440,000
Fully secured:
Free assets:
Cash 10,000
Or,
19. P410,000
Total available to unsecured claimants/total free P440,000
Less distributions to unsecured claims
with priority:
Wages payable P 10,000
Taxes payable 20,000 30,000
Amount available for unsecured
claims/net free assets P410,000
21. 64.1%
Dividend to unsecured creditors
P410,000 P640,000 = 64.1%
23. P393,580
Unsecured portion of notes payable and
interest P380,000
Dividend on unsecured amount x 64.1%
Amount received on unsecured portion P243,580
Proceeds from receivables and inventory 150,000
Total Received P393,580
Dividend to note holders: P393,580 P530,000 = 74.3%
24. P30,000
27. P230,000
P230,000
29. P340,000, same with No. 28, since there are no unrecorded expenses liabilities)
30. P60,675 you may the same procedure in Nos. 18 to 29 to solve this problem, the
following is the formal presentation of statement of affairs
39. P15,725 refer to No. 30 or P56,700, estimated net loss P40,975, owners equity
40. P56,700 refer to No. 30 or P169,650 P226,350
41. P56,700 (same with No. 40 since there are no unrecorded expenses liabilities)
42. P22,475
Liabilities
Unsecured
Assets Fully Partial With Without Owners'
Cash Noncash Secured Secured Priority Priority Equity
6/1/x5 Balances:
1,850 224,500 80,975 50,000 3,775 50,625 40,975
Cash
Receipts:
Securities 16,000 (5,800) 10,200
Sale
N/R Collected 15,000 (15,000) 0
Equipment 7,000 (43,000) (36,000
Sale )
Inventory 22,000 (41,000) (19,000
Sale )
Cash Disbursements:
Bank Loan (10,375 (10,375
) )
Part Pyt-A/P (29,000 ---------- --------- (50,000 ------- 21,000 ----------
) )
6/30 Balance 22,475 119,700 70,600 0 3,775 71,625 (3,825)
51. P150,000
53. P105,000
54. None
55. P26,900
Quiz - VI
1. P96,000
Claims of partially secured creditors.................................................. P 120,000
Current value of assets pledged with these creditors............................ (80,000)
Deficiency that is unsecured.................................................................. P 40,000
Claims of other unsecured creditors.................................................... 360,000
Total unsecured creditors claims........................................................ P 400,000
3. P56,000
Claims of partially secured creditors.................................................. P 90,000
Current value of assets pledged with these creditors............................ (50,000)
Deficiency that is unsecured.................................................................. P 40,000
Claims of other unsecured creditors.................................................... 200,000
Total unsecured creditors claims........................................................ P 240,000
7. P474,000 = Land and building sold for P450,000 leaves P60,000 unsecured still owing.
40% x
P60,000 = P24,000
15. P78,000
Cash P 65,000
Excess of pledged with secured liabilities
(P117,000 P104,000) 13,000
P 78,000
16. P52,000
Free assets after of liabilities with priority:
Total free assets P 78,000
Less: Liabilities with priority 26,000
P 52,000
17. P260,000
Unsecured creditors:
Excess of partially secured liabilities over
pledged assets (P195,000 P169,000) P 26,000
Accounts payable 234,000
P 260,000
18. P174,200
Payment on bond:
Value of pledged assets P 169,000
20%* of remaining P26,000 5,200
P 174,200
Free after priority: P52,000/P260,000 = 20%
19. P247,000
Free assets P390,000
Excess from assets pledged with fully secured
(P260,000 P195,000) 65,000
Amount available P455,000
Unsecured liabilities with priority ( 208,000)
Net free assets / available for unsecured P247,000
20. P32,000
Cash 120,000
Mortgage payable, paid in full ( 60,000 )
60,000
Note payable to bank, secured portion ( 30,000 )
30,000
Priority claims (P16,000 of administrative costs +
P2,000 of customer deposits + P4,000 property tax) ( 22,000 )
Available for unsecured nonpriority claims 8,000
Unsecured, nonpriority claims:
Unsecured portion of note payable to bank 10,000
Accounts payable 30,000
Total unsecured, nonpriority claims 40,000
P8,000 cash/P40,000 claims = P.20 on the dollar
Amount paid to bank:
P30,000 for secured portion + (P10,000 x .20) for
unsecured portion = 32,000
21. P15,400
Mortgage note receivable 35,000
Less: Portion secured by equipment ( 7,000 )
Unsecured portion 28,000
Estimated recovery on secured portion 7,000
Estimated recovery on unsecured portion
(P28,000 x P.30) = 8,400
Recovery on mortgage note receivable 15,400
22.
Mortgage note receivable 80,000
Less: Portion secured by marketable securities ( 60,000 )
Unsecured portion 20,000
Estimated recovery on secured portion 60,000
Estimated recovery on unsecured portion
(20,000 x P.25) = 5,000
Recovery on mortgage note receivable 65,000
23. P30,000
27 64.10%
. Unsecured portion of notes payable and
interest (P500,000 + P30,000 P150,000) P380,000
Accounts payable 260,000
Total claims of unsecured creditors P640,000
THEORIES
1. debtor
2. P5,000
3. inability to pay debts as they mature
4. a. administrative costs
b. certain postfiling gap claims in involuntary filings
c. wages, salaries, and commissions
d. employee benefit plans
e. deposits by individuals
f. taxes
5. infrequent
6. two-thirds, more than one-half
7. fraudulent, preferential
8. realization and liquidation