- en: 2.2 2 Sie ca2a000Aa000 cTo70ag0g0g000 SBIBNRRRBRS URI AE Kol (o)(oraa. ve) ea ee Nae fodge NiNTaes Ig is considered as partially secured liabilities wherein 0 {e) The P500,000 notes payable to PN rn P450,000 is used as collateral. Therefore, PNB is secured ‘operty with a fair market value of ete ive P450,000 because of the property while the balance of P50,000 of the notes Is unsecured. 2. (c) ‘ * The P40,000 owes to Xylo Corp. is considered a partially secured liabilities. Accounts receivable with a realizable valve of P45,000 is pledged to secure the liablity. Therefore, the estimated amount to be paid to Xylo Corp. would be as follows: Accounts Receivable at net realizable Valve «10.1... P45,000 ‘Add: Portion of free assets used to pay the unsecure amount: (P40,000 - P45,000) x .80 ie 12,000 Estimated amount to be paid to partially secured liabilities i ne 3. (b) Since the P Corp. expect to recover P.30 for every P! liability. Therefore, the unsecured ligbility of S Company that would be paid were as follows Unsecured loan ..... 200,000 Multiplied by: Expected recovery per peso of unsecured creditors .... 30% 4. (d) This problem is similar to No. 3, except that the question involves payment for ifs In\ in $ Company. Remember that receivables and payables transacted between and subsidiary still exist on their separate balance sheet. So, when collection or made, it will still be journalized in the usual manner, like an ordinary collection oF pay ‘an account which does not affect at all the investment in subsidiary account. %‘ : = Pee ss ies ___ Slate (deficit) equity before realization and ee isacalon” o 12 fo) =; {Shot Ossets at net realizable value ‘Less: Fully secured liabilities .. Total free assets ri Less: Unsecured Priority — administrative expenses... Net free assets....... Less: Unsecured crev jour priority Unsecured accounts and notes payable Interest on bank notes Fi. i Estimated deficiency to unsecured creditors 13. (d) Cash available........ Less: Mortgage payab! secured by property Amount available to unsecured creditors Less: Unsecured creditors with priority Administrative expenses ... Salaries payable. Net free assets or amount available to unsecured creditors without priority ... Expected recovery percentage of unsecured creditors 40,000 / (P80,000 ~ P50,000) + P50,000 ...... Therefore, the cash is distributed as follows: Unsecured creditors with priority Partially secured creditors: Property at selling price Add: Portion of free assets used 10 pay the unsecured amount (P80,000 — P50,000) x 50% 15,000 Unsecured Creditors without Priority 50,000 x .50Total unsecured liabilitie: ted Recovery Percentage of Unsecured Liabilities: Net tree assets 80,000 Total unsecured liabilities P100,000 “Therefore. the estimated amount to be paid to each creditors are: ia Amount & of Recover 80,000 100% (80/80) 60,000 100% (60/60) Fully secured liabilities ...... ~~ Unsecured liabilities with priority . Partially Secured Liabilities: Assets .. ‘Add: Portion of free assets to pay unsecured creditors (P50,000 - P40,000) x 80% . —8:000 48,000 96% (48/50) Unsecured liabilities without priori (P90,000 x 80%) 72,000 Total... P.260,000* (4) mount to be paid to creditors of P260,000 can be total estimated a1 e determining the total assets (ot fair valve}:| Total ree assets to unsecured liabillies. ¥ Less: Unsecured liabilities with priority Net free assets .. Less: Unsecured liabilities: Partially secured liabilities .. Less: Assets pledged to partially 7 secured liabilities, fair value .. Unsecured liabilities without priority ... _112,000 Total unsecured fiabilties.... P120,000 0 Estimated deficiency to unsecured fiabi P 42,000 (a) Or, alternatively: Estimated (gain) loss on realization: Loss on realization of assets pledged to fully secured liabilities (P90,000 - P75,000) .. P 15,000 Loss on realization of assets pledged to partially secured liabilities (P74,000 - P52,000) . 22,000 Loss or realization of free assets (70,000 — P40,000} 30,000 Add: Administrative expenses... Q Unrecorded expenses / liability 0 Total estimated net 1055 .....« 67,000 Less: Loss bome by the owners/stockholders' equity: Total assets at book value (P90,000 + P7 +000 + P70,000) ..... Less: Total liabilities (P7,000 + P30,000 + P60,000 + P112,000) ... P234,000 209,000 _25,000 Estimated deficiency to unsecured creditors... (2) Expected Recovery per Peso of Unsecured claim: P78,000 / P 120,000...P65,000 / P100,000 = 65% payment to partially secured creditors Realizable value of A/R (60% x P4,000) Add: Unsecured Portion: 65% (P3,000 ~ P2400 Assets Fuly Porticily With Without Cash Noncash Secured Secured Priority Priority 670,000 400,000 715,000 (690,000) (410,000) (280.000) P 25,000 260,000 P120,000 Uaudation of remaining Ossets ... . 732,000 (785,000) nt of fully sec it (240,000) (240,000) (110,000) (20/000) _10.900) Pee ee (110,000) licipated dividend 1o unsecured gecien ecu aD ee Sels available to unsecured creditor ( 00 ot unsecured creditars without prionty d (P177,000 / .. P407,00021. 22. 23. 24. {c} — P 180,000 of assets were sold (= 500,000 - P- Saye kyegliages. (= ’320,000) at a gain of P22,000, (4) ~ (P50,000 + P10,000 ~ 20,000 = P40,000) {b) ~ (P90,000 — P44,000 + P'12,000 = P58,000) (d) Estimated losses on realization of assets Less: Estimated gains on realization of assets Additional assets® wee: P1.440,000 Estimated net (gain) or loss in assets tsreatzation Add: Additional liabilities"... Estimated net (gain) or loss. Less: Stockholders’ equity: Capital stock Deficit Estimated amount to be recovered by stockholders Therefore, the pro-rate payment on the peso is: Estimated amount to be recovered by stockholders P560,009 Stockholders’ Equity~ Liabilities to be liquidated Uiobilities assumed . _ Supplementary credi Total credits atement of Realization and Liquidation Debits: : ae Ov sae Assets to be realized. P1,375,000 Assets acquired 750,000 Liabilities liquidated .. 1,875,000 Labi s Not liquidated 1,700,000 Supplementary charge" 3,125,000 Total Debits 8.825.000 B_425,000 {c) *Supplementary credits are revenue or income items such sales, Interest income, etc. 7 Net goin for the three month period “Supplementary debits are cost and expense items such os purchases, expenses, etc. %, (c) - the solution simply utilize the basic accounting equation of Assets = Liabilities + Stockholders’ Equity (SHE), thus: 1,500,000 | Common stock Q i Deficits .......... 500, | Stockholders’ equity (SHE) ... ae Add: Liabilities not liquidated " ) Total Liabilities and SHE... 2.703000 Less: Assets not realized (or end) .... r Cash balance, ending {) : lisfied t tev Claims of unsecured creditors must be satisfied fo whatever extent possibie | : cs Ba to administer the estate. 2. Unpaid saiories. etc csTotal Less: Fully secured creditors (accounts payable) Partially secured creditors (refer to No. 29).. Total free assets available to unsecured creditors Refer to No. 31 for altemative computation, 31. (c) Assets pledged to fully secured creditors: Inventory, at liquidation value. Less: Accounts payable Free assets of fully secured creditors .., Add: Free assets: Cash ... Receivables, realizable value P 12,000 (book valve, P280,000 - P100,000) .. Inventory, realizable value J 150,000 (book value, P70,000 ~ P40,000) ... Total free assets to unsecured creditors 4... Less: Unsecured creditors with priorityd recovery 000 7 P180,000 Estimated deficiency to unsecured creditors oF, alternatively: Estimated losses on realization of assets: Receivables {(P80,000 + P150,000) ~ P280,000] Prepaid expenses* Goodwill Less: Estimated gains on realization of assets: Inventory {(P44,000 + P32,000) — P70,000} .. Plant assets (P350,000 - P300,000) 156,000 Estimated net (gains) or loss on realization of on? oa assets. rachael Add: Unrecorded liabili 0 Estimated net (gains) oF loss . a: Less: Loss borne by owners/stockholders’ equi 1,000, Common stock .. Deficit 12.000 Estimated deficiency to unsecured creditors. 22000 (b) | sNormally, no realizable volue Is assigned to prepaid expenses because the amount Is 4 felatively immaterial. SoA sin the event of liquidation, goodwill is considered worthless,m ra a] * ‘fully Secured creditors (No. 36) . a laity ‘Unsecur Secured creditors (No red creditors with oy (No. 38) Unsecured creditors without prictl (No, 36)... een “Discrepancy of P400 due o pagnding:off and this can be proven by adding the to ‘Assets at realizable valve, i.e, P668,000 (refer to No. 30) 40. ((d) Assets to be tealized: Merchandise 60,000 Plant nd Equip- ment 100,000 P160,000 Uabilities liquidated: Accounts payable —_P21,000 Loan payable 45,000 66,000 Uabilities not tiqui- dated: Accoun's payable 49.000 Loan paya! , Accrued expenses 10,000 164,000 Total £380,000 41, (b) = refer to No. 40 42. (b) - refer to No. 40 43, _(c} ~reler to No. 40 Statement of Realization and Liquidation tay Amount. (i: a of Recovers 100% (40/ ; oe 98% ($26'8)s40) 40,000 100% (40/40) | 61,600 88% (61.6/70) 668,400" (cl) Asset realtzed; Merchandise 30,000 Plant and Equip. ment 25,000 Assets not realized: Merchandise P15,000 Plant and equip. ment 60,000 Ublitties to be tl. vidated: Accounts payable 70,000 Loan payaois Uabllities incurrent Accrued expenses Loss on realization Total