CORPORATE LIQUIDATION

Additional Exercise

ABC Corporation is in the process of liquidating all its assets. The following information are available:

a. Bonds payable amounting to P73,600 is secured by inventory with book value of P123,000 and
net realizable value of 2/3 of the recorded amount.
b. Of the P195,600 accounts payable, P55,000 is secured by equipment with a carrying amount of
P76,800 which is 70% realizable.
c. Building with a carrying amount of P129,000 has a net realizable value of P99,000.
d. Other unrecorded liabilities are accrued interest payable on bonds, P3,100; salaries payable,
P17,400; taxes payable, P11,600; and trustee’s fee, P8,500.
e. Cash available prior to liquidation amounts to P11,900.
f. Total assets of ABC Corporation presented in the Statement of Financial Position prior to
liquidation amounts to P480,000.
g. Except for prepaid expenses and goodwill with recorded amounts of P7,600 and P22,000
respectively, remaining assets other than those whose realizable values were mentioned above
have a realizable value of 60% of the recorded amount.
h. Total liabilities of ABC Corporation presented in the Statement of Financial Position prior to
liquidation amounts to P380,000.

Compute for the following:

1. Recovery percentage 57.2%
2. Net free assets 144,520
3. Estimated deficiency 108,120
4. Payment to fully secured creditors 76,700
5. Payment to partially secured creditors 53,760 + (1,240*57.2%)= 54,469
6. Payment to unsecured creditors with priority 37,500
7. Payment to unsecured creditors without priority 252,640*57.2%=144,510