The equipment loan payable is secured by specific plant assets having a book

value of P300,000 and a realizable value of P350,000. Of the accounts payable,

P40,000 is secured by inventory which has a cost of P40,000 and a liquidation
value of P44,000. The balance of the inventory has a realizable value of P32,000.
Receivables with a book value and market value of P100,000 and P80,000
respectively have been pledged as collateral on the business loan payable. The
balance of the receivables have a realizable value of P150,000.
(Adapted)

21. Assuming trustee expenses of 12,000 in addition to recorded liabilities, which

of the remaining unsecured creditors has the next highest order of priority.

a. Accrued payroll c. Loan from officer

b. Equipment loan payable d. Business loan payable

22. The realizable value of assets pledged with fully secured creditors is:

a. P459,000 c. P40,000
b. 44,000 d. 489,000

23. Of those creditors who are partially secured, their unsecured amounts are:

a. P430,000 c. P540,000
b. 110,000 d. 120,000

24. The total realizable value of free assets to unsecured creditors before
unsecured creditors with priority is:

a. P628,000 c. P220,000
b. 232,000 d. 198,000

25. The dividend to unsecured creditors or the expected recovery percentage

of unsecured creditors (rounded) is:

a. 90%. c. 88%
b. 100%. d. 76%

26. Estimated deficiency to unsecured creditors is:

a. P —0– c. P 2,000
b. 22,000 d. 12,000
27. Estimated loss on asset disposition is:

a. P51,000 c. P 51,000
b. 89,000 d. 90,000

28. Estimated gain as asset disposition is:

a. P56,000 c. P 52,000
b. 54,000 d. 6,000

29. Estimated amount paid to unsecured creditors with priority is:

a. P10,000 c. P 40,000
b. 30,000 d. 110,000

30. Estimated amount paid to fully secured creditors is:

a. P40,000 c. P470,000
b. 390,000 d. 430,000

31. Estimated amount paid to unsecured creditors without priority is:

a. P70,000 c. P 20,000
b. 61,600 d. 50,000

32. Estimated payment to partially secured creditors is:

a. P358,800 c. P168,000
b. 516,800 d. 430,000

33. Estimated payment to creditors is (discrepancy is expected due to rounding

off).

a. P580,000 c. P571,000
b. 659,600 d. 668,400
 MULTIPLE CHOICE ANSWERS

1. c 11. c 21. a 31. d

2. c 12. c 22. d
3. b 13. d 23. c
4. d 14. d 24. d
5. c 15. a 25. d
6. c 16. d 26. a
7. c 17. c 27. c
8. d 18. d 28. a
9. d 19. c 29. b
10. b 20. c 30. b

MULTIPLE CHOICE ANSWERS EXPLAINED

eExeEXPLAINED
1. (c)
The P500,000 notes payable to PNB is considered as partially secured liabilities
wherein a property with a fair market value of P450,000 is used as collateral.
Therefore, PNB is secured to receive P450,000 because of the property while
the balance of P50,000 of the notes is unsecured.

2. (c)
The P60,000 owes to Xylo Corp. is considered a partially secured liabilities.
Accounts receivable with a realizable value of P45,000 is pledged to secure
the liability. Therefore, the estimated amount to be paid to Xylo Corp.
would be as follows:

Accounts Receivable at net realizable value .…………….. P45,000

Add: Portion of free assets used to pay the unsecured
amount: (P60,000-P45,000) x .80 ………………………. 12,000
Estimated amount to be paid to partially secured
liabilities ……………………………………………………………. P57,000 (c)

3. (b)
Since the P Corp. expect to recover P.30 for every P1 liability. Therefore, the
unsecured liability of S Company that would be paid were as follows:

Unsecured loan …………………………………………………. P200,000

Multiplied by: Expected recovery per peso of
unsecured creditors …………………………………. 30%
P 60,000 (b)