ADVANCE ACCOUNTING 3

Long Quiz- Corporate Liquidation

PROBLEM 1- TIDE COMPANY

A. Computation of free assets

Cash 240,000
Accounts Receivable 480,000
Inventories 530,000
Equipment – net 180,000
Land and Building 420,000
Other Assets -0-
Total estimated realizable value 1,850,000
Less payments made
Liquidating expenses 35,000
Taxes 70,000
Wages 228,000
Mortgage Payable 420,000
Notes Payable 300,000 1,055,000
FREE ASSETS 795,000

B. Computation of unsecured liabilities

Accounts Payable 1,200,000

Mortgage Payable ( 61,500-420,000 ) 195,000
Unrecorded Liabilities 20,000
Total unsecured liabilities 1,415,000

C. Percentage of recovery
795,000/ 1415,000 = .5618

D. Estimated deficiency
Net Free assets 795,000
Unsecured creditors 1,415,000
Estimated deficiency 620,000

E. Schedule of Payments

With Priority
Wages 72,000
Taxes 228,000
Liquidating expenses 35,000 335,000
Fully Secured – Notes Payable 300,000

Partially secured 420,000

Unsecured liabilities 1,415,000 x .5618 795,000

TOTAL 1,850,000
PROBLEM 2- SUPERSTORE COMPANY
A. Computation of free assets
Cash 400,000
Accounts Receivable 630,000
Inventories 20,000
420,000 420,000
Land and Building 1,700,000
Machineries 200,000
Patents 500,000
Total estimated realizable value 3,850,000
Less Payments
Wages payable 600,000
Taxes payable 100,000
Mortgage Payable 1,650,000 1,650,000
Interest Payable 150,000 – 100,000 50,000 1,700,000 2,400,000
NET FREE ASSETS 1,450,000

B. Computation of Unsecured Liabilities

Accounts Payable 1,100,000
Mortgage Payable 1,650,000 + 150,000+
1,800,000 – 1,700,000 100,000
Notes Payable 550,000 + 50,000 600,000
Total unsecured liabilities 1,800,000

C. Percentage of recovery
1450,000/ 1800,000 = 80.55

D. Estimated Deficiency
Net Free Assets 1,450,000
Unsecured liabilities 1,800,000
Estimated deficiency 350,000

E Schedule of Payments
With Priority
Wages 600,00
Taxes 100,000 700,000
Fully Secured – Mortgage Payable 1,700,000
1800,000- 1700,000+ 100,000 x .80.56 80,600 1,780,600
Partially secured 420,000

Unsecured liabilities 795,000

1,100,000 x .8055 886,100
600,000 x .8055 483,300
TOTAL Payments 3,850,000

PROBLEM 3 PHILTEL CO.

SCHEDULE OF PAYMENTS
With Priority 80,000 + 20,000 = 100,000
Partially secured
Mortgage payable 800,000 ( 500,000 secured0 500,000
800,000 – 500,000 = 300,000
Interest 100,000 400,000 x .444, 177,750
Accounts Payable 500,000 x .4444. 222,250
Total 1,000,000

Cash 1,000,000
Less Payment of priority liabilities
Administrative expenses 80,000
Salaries Payable 20,000 100,000
Net Free Assets 900,000
Less : Payments
Partially secured 500,000
Net Free Assets 400,000

Percentage of recovery 400,000/900,000 = .4444