CORPORATE LIQUIDATION

Question #11 Page 100

The following data are provided by the Troubled Company:

Assets at book value P 150,000

Assets at net realizable value 105,000
Liabilities at book value:
Fully secured mortgage .. 60,000
Unsecured accounts and notes payable 70,000
Unrecorded liabilities:
Interest on bank notes . 500
Estimated cost of administering estate . 6,000
The court has appointed a trustee to liquidate the company

The journal entry made by the trustee to record the assets and liabilities should include an estate deficit
of:

a. 31,500
b. 31,000
c. 25,500
d. 25,000

Answer: C

Assets, at net realizable value P 105,000

Less: Liabilities
Per books 130,000
Add: Unrecorded interest 500 130,500

Estate (deficit) equity before realization and liquidation P (25,500)

Question #12 Page 100

Using the same information in in number 11, the statement of affairs prepared by the trustee at this time
should include an estimated deficiency to unsecured creditors of:

a. 45,000
b. 39,000
c. 31,500
d. 25,000

Answer: C

Total assets at net realizable value P 105,000

Less: Fully secured liabilities 60,000
Total Free Assets 45,000
Less: Unsecured creditors with priority
Administrative expenses 6,000

Net Free Assets P39,000

Less: Unsecured creditors without priority
Unsecured accounts and notes payable 70,000
Interest on bank notes 500 70,500

Estimated deficiency to unsecured creditors P(31,500)