Jake, a CPA, has prepared a statement of affairs. Assets which there are no claims or liens are expected to produce P140,000, which must be allocated to unsecured claims of all classes totaling P210,000. The following are some of the claims outstanding: i. Accounting fees for Black, P3,000 ii. An unrecorded note for P2,000, on which P120 of interest has accrued, held by Blue. iii. A note for P6,000 secured by P8,000 receivables, estimated to be 60% collectible held by Orange. iv. A P3,000 note, on which P60 of interest has accrued, held by Pink. Property with a book value of P2,000 and a market value of P3,600 is pledged to guarantee payment of principal and interest. v. Unpaid income taxes P7,000 Compute the estimated payment to partially secured creditors:

Jake, a CPA, has prepared a statement of affairs. Assets which there are no claims or liens are expected to produce P140,000, which must be allocated to unsecured claims of all classes totaling P210,000. The following are some of the claims outstanding: i. Accounting fees for Black, P3,000 ii. An unrecorded note for P2,000, on which P120 of interest has accrued, held by Blue. iii. A note for P6,000 secured by P8,000 receivables, estimated to be 60% collectible held by Orange. iv. A P3,000 note, on which P60 of interest has accrued, held by Pink. Property with a book value of P2,000 and a market value of P3,600 is pledged to guarantee payment of principal and interest. v. Unpaid income taxes P7,000 Compute the estimated payment to partially secured creditors:

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 6PA: Machine Corp. has several pending lawsuits against its company. Review each situation and (1)...

See similar textbooks

Similar questions

Axel Brick Company has a lawsuit pending from a customer claiming $100,000 in damages. Axel's attorney advises the likelihood the customer will win the lawsuit is reasonably probable. GAAP requires at a minimum that this contingent liability be... A. Disclosed in a note to the financial statements B. Record as a liability on the balance sheet C. Record as an expense on the income statement
Karim Inc., which owes Habib Co. SAR 900,000 in notes payable, is in financial difficulty. To eliminate the debt, Habib agrees to accept from Karim land having a fair value of SAR 610,000 and a recorded cost of SAR 450,000. a) Compute the amount of gain or loss to Karim, Inc. on the transfer (disposition) of the land. b) Compute the amount of gain or loss to Karim, Inc. on the settlement of the debt. c) Prepare the journal entry on Karim's books to record the settlement of this debt
Mary received a Form 1099-C with $15,000 in box 2 from her credit card company. Her Insolvency Worksheet indicated that Mary was insolvent prior to the cancellation of debt by $8,000. To fill out the Basis (Cost) of Assets Worksheet, what information will she need? The cost basis immediately after the debt cancellation. The cost basis immediately before the debt cancellation. The fair market value (FMV) immediately after the debt cancellation. The fair market value (FMV) immediately before the debt cancellation. Mark for follow up
Machine Corp. has several pending lawsuits against its company. Review each situation and (1) determine the treatment for each situation as probable and estimable, probable and inestimable, reasonably possible, or remote; (2) determine what, if any, recognition or note disclosure is required; and (3) prepare any journal entries required to recognize a contingent liability. A. A pending lawsuit, claiming $100,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win.
Swell Company has a lawsuit pending from a customer claiming damages of $100,000. Swell’s attorney advises that the likelihood the customer will win is remote. GAAP requires at a minimum that this contingent liability be a. disclosed in the footnotes. b. disclosed in the footnotes, with ranges of potential loss. c. recorded as a journal entry, as well as disclosed in the footnotes. d. No disclosure is required.
An entity had the following liabilities on December 31, 2020: Accounts Payable 55,000 Unsecured notes, 8% due 7/1/2021 400,000 Accrued expenses 35,000 Contingent liability 450,000 Deferred tax liability 25,000 Senior bonds, 7%, due 3/31/2021 1,000,000 The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed against the entity. The legal counsel expects the suit to be settled in 2021 and has estimated that the entity will be liable for damages in the range of P450,000 to P750,000. The deferred tax liability is expected to reverse in 2021. What amount should be reported on December 31, 2020 for current liabilities? None of theseNone of these 940,000940,000 1,490,0001,490,000 1,515,0001,515,000…
Cline Inc. prepares its financial statements according to International Accounting Standards (IFRS). It recently concluded that it will lose a lawsuit, and that it will pay a range of damages falling somewhere between $10 million and $20 million. Cline should accrue a liability in the amount of. a. $0, as no specific amount is probable to be incurred. b. $10 million, the lower end of the range of probable amounts. c. $15 million, the expected value of the amount to be paid. d. $20 million, the upper end of the range of probable amounts.
petty peter pty paid the following legal expenses to attorneys for the 2022 year of assessment: R5 450 of the fee was for debt collection R25 000 related to the drawing up of a restraint of trade agreement which was paid to an ex-employer. R25 000 related to dispute between the company's director and one of the employees due to sexist remarks made by the director. What amount will be deducted in terms of legal expenses when the company is computing their taxable income for the 2022 year as assessment? A 30 450 B 55 450 C 25 000 D 5 450
Voi company provided the following facts regarding pending litigation on December 31,2020 1. The entity is defending against a first lawsuit and believe that there is a 51% chance that it will lose in court. The entity estimate that damages amounting to P 1,000,000 2. The entity is defending against a second lawsuit which management believes it is virtually certain to lose in court. If it losses, management estimate damages will amount in between P 3,000,000 to P 5,000,000 3. The entity is defending a third but the relevant loss will incur in the future. The present values of the endpoints of the range are P 1,500,000 and P 2,500,000. The management believes the effect of the time value of money on these amounts are Materials but also believes the timing of these amount are uncertain. 4. The entity is defending against a fourth lawsuit and believes there is only 25% chance it will lose in court.If the entity lose management believes damages will likely be from P 3,000,000 to P…
Mr..Park loaned P24,000,000 to Jay & Won Company. The loan is secured by land situated in North Carolina, U.S.A. with a book value and fair value of P30,000,000 and P18,000,000, respectively. Due to the current financial conditions, Jay & Won Company was forced to liquidate. What amount will the Mr. Park receive if unsecured creditors receive 30% of their claims?
M issues a negotiable BOE payable to P or order for P10,000. P endorsed the instrument to A, then A to B, then B to C, then C to D. D presents the instrument to the drawee, but the drawee dishonored the instrument. Assuming that D approached C and invoked his warranty as an indorser, from whom can C seek recovery of amount paid to D? a. B, then A, then P, then M. b. M, P, A, B without any particular order c. M d. B
Which of the following is not considered “constructive receipt” income in 2020? A. Andrew Mason was informed that his check for services rendered was available on December 15, 2020, but he waited until January 16, 2021, to pick up the check. B. A payment on a sale of real property placed in escrow on December 16, 2020, but not received by Benjamin Miles until January 12, 2021, when the transaction was closed. c. Earned income of Candice Cord was received by her agent on December 30, 2020, but was not received by her until January 5, 2021. d. Daniel Dryer received a check on December 30, 2020, for services rendered, but was unable to make a deposit until January 5, 2021. e. Ellen Elks received stock on December 30, 2020, for services rendered, but was unable to find a buyer for the stock until January 20, 2021.