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Chapter 5 - Problem 5 PDF
Chapter 5 - Problem 5 PDF
PROBLEM 5
Requirement A
Free assets:
Cash 200,000
Accounts receivable 450,000 750,000
Total free assets 1,200,000
Unsecured liabilities with priority: (980,000)
Net free assets 220,000
Requirement B
Requirement D
Requirement E
BYE-BYE CORPORATION
STATEMENT OF AFFAIRS
AS OF JANUARY 1, 20X1
Available for
Realizable unsecured
Book values ASSETS values creditors
Assets pledged to fully secured
creditors:
1,000,000 Land 1,300,000
Loan payable (750,000) 550,000
Free assets:
200,000 Cash 200,000
500,000 Accounts receivable 450,000 650,000
Total free assets 1,200,000
Less: Unsecured liabilities with
priority (see below) (980,000)
Net free assets 220,000
Estimated deficiency (squeeze) 830,000
2,300,000 Totals 1,050,000
Unsecured
Realizable non-priority
Book values LIABILITIES values liabilities
Unsecured liabilities with
priority:
- Administrative expenses 180,000
800,000 Salaries payable 800,000 -
Unsecured creditors:
700,000 Accounts payable 700,000 700,000
2.
Requirement A
I. Opening journal entry
Jan. 1
20x1 Cash 200,000
Accounts receivable 500,000
Equipment, net 600,000
Land 1,000,000
Estate deficit 450,000
Accounts payable 700,000
Salaries payable 800,000
Note payable 500,000
Loan payable 750,000
Jan.1
20x1 Estate deficit - new 30,000
Interest payable - new 30,000
Cash 280,000
a. Estate deficit 120,000
Accounts Receivable 440,000
Cash 150,000
b. Estate deficit 450,000
Equipment 600,000
Cash 1,400,000
c. Land 1,000,000
Estate deficit 400,000
Assets not
Assets acquired: realized:
- - - -
LIABILITIES
Liabilities Liabilities to be
liquidated: liquidated:
Accounts payable 350,000 Accounts payable 700,000
Salaries payable 200,000 Salaries payable 800,000
Note payable 150,000 Note payable 500,000
Interest payable 30,000 Loan payable 750,000
Loan payable 750,000
Total 1,480,000 Total 2,750,000
Supplementary Items
Supplementary Supplmentary
expenses Income:
Administrative
expenses 240,000 -
Net loss during the
period 60,000
4,770,000 4,770,000
Requirement C
Cash
Beginning balance 200,000
310,000
Requirement D
Estate deficit
1/1/x1 opening bal. 450,000
a. 120,000 350,000 b.
b. 450,000 400,000 c.
e. 240,000
540,000 - end deficit (debit balance)