Answered: Accounting Question

Business

Accounting

Accounting Question

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Expert Solution

Step 1

In the given situation, the partially secured debt would comprise of the creditors for whom the value of asset pledged is not sufficient to cover the entire debt which is debt of $134000 secured against asset of $52000. The partially secured creditors will be paid entire $52000 out of the asset and the remaining portion of their debt $134000-52000=$82000 will be treated at par with unsecured creditors.

Now, the completely secured creditors will be paid $72000 out of total assets of $120000 and the remaining funds will be first paid to priority creditors and unsecured creditors.