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Total free assets Net free assets Unsecured liabilities with priority

Total free assets Net free assets Unsecured liabilities with priority

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 5EA: Millennium Associates records bad debt using the allowance, income statement method. They recorded...
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Using the data, compute the following:

  1. Total free assets
  2. Net free assets
  3. Unsecured liabilities with priority
  4. Unsecured liabilities without priority
  5. Estimated recovery percentage
  6. Net gain (loss) on realization
  7. Estimated deficiency
  8. Net income (loss) on realization and liquidation                       
  9. Amount paid to partially secured creditors                       
  10. Amount paid to unsecured creditors without priority                         
  11. Total estimated payment to creditors                       
  12. Total payment to unsecured creditors
Lugi Ka Na Company has been forced into bankruptcy as of April 30 because of its inability to pay its debts. The statement of financial position on that date shows: ASSETS LIABILITIES & EQUITY Cash Accounts Receivable Note Receivable Inventory Prepaid Expenses Land and Building Equipment, net P5,400 78,700 37,000 175,700 1,900 122,500 97,600 Accounts Payable Notes Payable – PNB Notes Payable - suppliers Accruedwages Accruedtaxes P105,000 30,000 102,500 3,700 9,300 180,000 150,000 (61,700) P518,800 Mortgage Bonds Payable Common stock-P100 par Retained Earnings Total Liabilities & Equity Total Assets P518,800 Additional information: a. Accounts receivable of P32,220 and notes receivable of P25,000 are expected to be collectible. The good notes are pledged to PhilippineNational Bank. b. Inventories are expectedto bring in P90,200when soldunder bankruptcyconditions. Landand buildingshave an appraised value of P190,000. They serveas security on the bonds. d. The currentvalue of the equipment, net of disposal costis P18,000. e. Estimated legal and accounting fees for the liquidation are P2,000. c. f. Unrecorded interest on notes payableto supplier amountsto P1,000.
Transcribed Image Text:Lugi Ka Na Company has been forced into bankruptcy as of April 30 because of its inability to pay its debts. The statement of financial position on that date shows: ASSETS LIABILITIES & EQUITY Cash Accounts Receivable Note Receivable Inventory Prepaid Expenses Land and Building Equipment, net P5,400 78,700 37,000 175,700 1,900 122,500 97,600 Accounts Payable Notes Payable – PNB Notes Payable - suppliers Accruedwages Accruedtaxes P105,000 30,000 102,500 3,700 9,300 180,000 150,000 (61,700) P518,800 Mortgage Bonds Payable Common stock-P100 par Retained Earnings Total Liabilities & Equity Total Assets P518,800 Additional information: a. Accounts receivable of P32,220 and notes receivable of P25,000 are expected to be collectible. The good notes are pledged to PhilippineNational Bank. b. Inventories are expectedto bring in P90,200when soldunder bankruptcyconditions. Landand buildingshave an appraised value of P190,000. They serveas security on the bonds. d. The currentvalue of the equipment, net of disposal costis P18,000. e. Estimated legal and accounting fees for the liquidation are P2,000. c. f. Unrecorded interest on notes payableto supplier amountsto P1,000.
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