The PAL Company has decided to seek liquidation after previous restructuring and

quasi-reorganization attempts failed. The company has the following condensed

statement of financial position as of May 1,2011:
                       
ASSETS                                   LIABILITIES & STOCKHOLDER’S EQUITY
Cash                          P  12,000           Accrued payroll                                     P  40,000
Receivables (net)         280,000        Loans from officer                                     50,000
Inventory                         70,000         Accounts payable                                      60,000
Prepaid expenses         1,000          Equipment loan payable                           360,000
Plant assets                  300,000         Business loan payable                              180,000
Goodwill                          39,000          Common stock                                          60,000
                                                             Deficit                                                  
(48,000)        
Total                         P 702,000         Total                                                   P 702,000
 
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.