Accounting LiquidationSouthwestern Wear Inc. has the following balance sheet:$1,875,000 Accounts payable1,875,000Notes payableCurrent assetsFixed assetsSubordinated debenturesTotal debtCommon equity$3,750,000 Total liabilities & equityTotal assetsThe trustee's costs total $346,000, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goesbankrupt and liquidates, how much will each class of investors receive if a total of $2.3 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and forpercentage values to the nearest whole number. If your answer is zero, enter "0". Enter your answers as positive values.Distribution of proceeds on liquidation:Proceeds from the sale of assetsLess:1. First mortgage (paid from the sale of fixed assets)2. Fees and expenses of bankruptcy3. Wages due to workers within 3 months of bankruptcy4. Taxes due to federal, state, and local governments5. Unfunded pension liabilitiesFunds available for distribution to general creditors$$ 375,000750,000750,000$$1,875,0001,875,000$3,750,000 Distribution to general creditors:General Creditors'Claims(1)Accounts payableNotes payableSubordinateddebenturesTotalAmount of Claim(2)$$Application of 100%Distribution(3)$$Distribution afterSubordinationAdjustment(4)$$Percentage ofOriginal ClaimReceived(5)Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places.The remaining $will go to the common stockholders. They will receive only%% of the amount of equity on the balance sheet.

Liquidation typically occurs when a company is unable to pay its debts or when its owners decide to…

Answered: Liquidation Southwestern Wear Inc. has…

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter5: Corporations: Earnings & Profits And Dividend Distributions

Section: Chapter Questions

Problem 31P

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Liquidation Southwestern Wear Inc. has the following balance sheet: Current assets $1,875,000 Accounts payable $ 375,000 Fixed assets 1,875,000 Notes payable 750,000 Subordinated debentures 750,000 Total debt $1,875,000 Common equity 1,875,000 Total assets $3,750,000 Total liabilities & equity $3,750,000 The trustee's costs total $296,000, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.3 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and for percentage values to the nearest whole number. If your answer is zero, enter “0”. Enter your answers as positive values. Distribution of proceeds on liquidation: Proceeds from the sale of assets $ Less: 1. First…
Boulter, Incorporated, began business on January 1, 2024. At the end of December 2024, Boulter had the following investments in debt securities: Trading Available-for-Sale Cost $ 60,000 $ 110,000 Fair value 54,000 107,500 All declines in value are deemed to be temporary in nature. How should the corresponding losses be reflected in the financial statements at December 31, 2024? Income Statement Accumulated Other Comprehensive Income in Shareholders' Equity a. $ 8,500 $ 0 b. $ 0 $ 8,500 c. $ 6,000 $ 2,500 d. $ 2,500 $ 6,000
Quest Company is threatened with bankruptcy due to its inability to meet interest payments and fund requirements to retire P6,000,000 note payable with accrued interest payable of P600,000. The entity has entered into an agreement with the creditor to exchange equity instruments for the liability.The terms of the exchange are 300,000 ordinary shares wit P5 par value and P10 market value, and 25,000 preference shares with P10 par value and P60 market value. 1. What is the gain on the extinguishment of the note payable? 2. What is the total share premium from the issuance of the preference and ordinary shares?
Deere, Inc. will be liquidated under Chapter 7 of the Bankruptcy Act. Its current balance sheet is shown below. Fixed assets will be sold for $4,000,000 and current assets will be sold for $3,000,000. All fixed assets are pledged as collateral for all mortgage bonds. Subordinated debentures are subordinate only to notes payable. Trustee costs are $750,000. Before Before Default Balance Sheet Default Current Assets 5,000,000 Accounts payable 1,000,000 Net fixed assets 7,000,000 Accrued taxes 50,000 Accrued wages 85,000 Notes payable 2,000,000 Total current liabilities 3,135,000 First-mortgage bonds 2,000,000 Second-mortgage bonds 3,000,000 Subordinated debentures 5,000,000 Common stock 300,000 Retained earnings (1,435,000) Total assets 12,000,000 Total claims 12,000,000 a. How much will SHs receive? b. How much will mortgage bondholders receive? c. How much will…
POP Inc is to be liquidated and has the following liabilities: income taxes payable 42,805 wages payable 157,320 accounts payable (including customers credit balances of 50,000) 1,380,000 bonds payable(including interests of 50,000) 1,250,000 notes payable( excluding interests of 20,000) 670,000 The company's asset is composed of the following at their book values: cash 100,000 accounts receivable(including customer's credit balances mentioned above) 500,000 inventory (used as security for the notes) 330,000 land and building (used as security for the bonds) 1,500,000 comparing to their net realizable values, the followinghas been determined: - 20% of the accounts receivable is worthless - 1/3 of the inventory owned by the company is worthless - land and building is undervalued by 500,000 How much will be recovered by creditors from the account payable? Round off answers to two decimal places
Accounting for Special Transactions - Corporate Liquidation & Reorganization Merida Co.'s financial position prior to liquidation is as follows: ASSETS Liabilities and OE Cash 80,000 Accrued expenses 442,000 Accounts Receivable 440,000 Current tax payable 700,000 Note receivable 200,000 Accounts payable 2,000,000 Inventory 1,060,000 Note payable 600,000 Prepaid assets 20,000 Loan payable 4,000,000 Land 1,000,000 Share Capital 1,000,000 Building, net 4,000,000 Retained earnings (deficit) (1,342,000) Equipment, net 600,000 Total 7,400,000 Total 7,400,000 Merida Co's liqudaation is entrusted to Snow White, a receiver. Information on January 1, 20x1: * Interest of P20,000 is expected to be collected on the note and interest of 30,000 is expected to be paid on the loan. * Liquidation costs of P60,000 are expected to be incurred. Information on transactions for the six months ended June 30, 20x1 *Only 75% of the total account receivable was collected. The…
S.Co went into liquidation on 1/1/2014. The liquidator whose remuneration is 3% on all assets realized and 2% on amount distribution to shareholders (preference and equity) realized all the assets for $1,00,000. Expense of liquidation $18,000 Unsecured creditors (including salary and wages outstanding $ 12,000 $1,36,000. 10,000 6% preference shares of $30 each (dividend paid up to 31/12/2004) $3,00,000. 20,000 equity shares of $10 each $9 per share are called and paid $1,80,000. General reserve $2,40,000 Profit and loss $40,000 Under Article of association of the company the preference shares have the right to receive 1/3 of the surplus after repaying the equity share capital. Prepare Liquidators Final statement of account.
Hurrah, Inc. recently has had financial difficulty and is being liquidated by the Federal Bankruptcy Court. The firm has a liquidation value of $1,000,000 from the fixed assets that served as collateral for the mortgage bonds (all prior claims have been satisfied). The firm's current capital structure is shown below. How much will the common stockholders receive in the liquidation? Source of Capital Amount Unsecured bonds $500,000 Mortgage bonds 400,000 Preferred stock 100,000 Common stock 500,000
Shanghai Company is unable to meet interest payments and fund requirements to retire its P1,500,000 bonds payable. Accrued interest on the bonds amounted to P150,000. The bonds are held by Spaghetti Investments, Inc. To prevent bankruptcy, Shanghai Company entered into an agreement with Spaghetti Financing, Inc. to exchange equity securities for the debt. Shanghai Company is issuing 20,000 shares of its P50 par value ordinary shares. The ordinary share is currently selling at P65. The gain on debt restructuring is A. 250,000 B. 350,000 C. 650,000 D. 0
8 ABC Company filed for a voluntary bankruptcy which was granted after having submitted all the required papers and documents. You are provided the following information as of June 30, 2022: Assets Net Book Value Liquidation Value Cash P 4,997 Investments in equity securities 25,000 P40,000 plus uncollected dividends of P5,000 Accounts receivable, net 54,000 P28,000 expected collection Inventory 75,000 P100,000 after further processing of P10,000 Prepaid expense 8,000 P2,000 is refundable Land 140,000 150% of net book value Building, net 200,000 90% of net book value Equipment 80,000 30% of net book value Goodwill 10,000 Liabilities and Equity Carrying Value Other Information Notes payable P120,000 Secured by inventory Trade and other payables 100,000 Loans payable 350,000 Secured by land and…
Aero Inc. had the following balance sheet at December 31, 2019. Aero Inc.Balance SheetDecember 31, 2019 Cash $ 20,000 Accounts payable $ 30,000 Accounts receivable 21,200 Bonds payable 41,000 Investments 32,000 Common stock 100,000 Plant assets (net) 81,000 Retained earnings 23,200 Land 40,000 $194,200 $194,200 During 2020, the following occurred. 1. Aero liquidated its available-for-sale debt investment portfolio at a loss of $5,000. 2. A tract of land was purchased for $38,000. 3. An additional $30,000 in common stock was issued at par. 4. Dividends totaling $10,000 were declared and paid to stockholders. 5. Net income for 2020 was $35,000, including $12,000 in depreciation expense. 6. Land was purchased through the issuance of $30,000 in additional bonds. 7. At December 31, 2020, Cash was $70,200, Accounts Receivable was $42,000, and Accounts Payable was $40,000. Instructions a. Prepare a statement of cash…
PUP CAF Corporation acquired a 4-year, P3,000,000 par value bonds when the prevailing rate of interest is 14% on January 1, 2020. Interests of 12% are collectible every December 31. The Company’s business model is to collect contractual cash flows and to sell the bonds when circumstances allow. The bonds were selling at 101 on December 31, 2020 and 95 on December 31, 2021. How much is the unrealized gain (loss) recognized in the statement of comprehensive income for the year ended December 31, 2021?

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