Numbers 19, 20 and 21 (Corporate Liquidation)

Cagayan Company is experiencing financial problems which resulted to ultimate

bankruptcy. The statement of financial position of the entity before liquidation is
presented below:
Cash 100,000 Income tax payable 200,000
Inventory 300,000 Salaries payable 300,000
Land 200,000 Note payable 800,000
Mortgage payable 100,000
Accounts payable 400,000
Contributed capital 500,000
Deficit (1,700,000)

 The note payable is secured by the inventory with net realizable value of
P250,000.
 The mortgage payable is secured by the land with fair value of P120,000.

14. What is the amount received by the holder of the note payable at the end of
corporate liquidation?
A. 320,000
B. 300,000
C. 250,000
D. 260,000

15. What is the amount received by the holder of the mortgage payable at the end of
corporate liquidation?
A. 120,000
B. 200,000
C. 150,000
D. 100,000

16. What is the amount received by the employees at the end of corporate liquidation
concerning their salaries?
A. 100,000
B. 120,000
C. 72,000
D. 300,000
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Numbers 22 and 23 (Corporate Liquidation)

Surigao Company is bankrupt and has undergone corporate liquidation. Presented

below is its statement of financial position before the start of liquidation:

Cash 300,000 Accounts Payable 100,000

Machinery 500,000 Salaries Payable 200,000
Building 1,200,000 Income tax Payable 300,000
Loan Payable 400,000
Mortgage payable 500,000
Contributed capital 800,000
Deficit (300,000)

 Liquidation expenses amounting to P600,000 were paid.

 The loan payable is secured by the machinery with fair value of P300,000.
 The mortgage payable is secured by the building.
 At the end of liquidation, the holder of loan payable received P340,000.

17. What is the amount received by the holder of accounts payable at the end of
liquidation?
A. 85,000
B. 15,000
C. 40,000
D. 60,000

18. What is the amount of net free assets available at the end of liquidation?
A. 80,000
B. 40,000
C. 120,000
D. 200,000