LiquidationSouthwestern Wear Inc. has the following balance sheet:Current assets$1,875,000 Accounts payable$ 375,000Fixed assets1,875,000 Notes payable750,000Subordinated debentures750,000Total debt$1,875,000Common equity1,875,000Total assets$3,750,000 Total liabilities & equity$3,750,000The trustee's costs total $310,250, 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 andliquidates, how much will each class of investors receive if a total$2.7 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and for percentage values to the nearest wholenumber. If your answer is zero, enter "0". Enter your answers as positive values.Distribution of proceeds on liquidation:Proceeds from the sale of assets24Less:1. First mortgage (paid from the sale of fixed assets)2. Fees and expenses of bankruptcy3. Wages due to workers within 3 months of bankruptcy4. Taxes due to federal, state, and local governments5. Unfunded pension liabilitiesFunds available for distribution to general creditors$Distribution to general creditors:Distribution afterPercentage ofGeneral Creditors'Application of 100%SubordinationOriginal ClaimClaimsAmount of ClaimDistributionAdjustmentReceived(1)(2)(3)(4)(5)Accounts payable242$%Notes payableSubordinateddebenturesTotal$$$4Round 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.

General creditors refer to the creditors who lend money to the borrower but they don't have an…

uthwestern Wear Inc. has the following balance sheet: $1,875,000 Accounts payable $ 375,000 rrent assets ed assets 1,875,000 Notes payable 750,000 Subordinated debentures 750,000 Total debt $1,875,000 Common equity 1,875,000 $3,750,000 $3,750,000 Total liabilities & equity cal assets e trustee's costs total $310,250, and the firm has no accrued taxes or wages. Southwestern has no unfunded i uidates, how much will each class of investors receive if a total of $2.7 million is received from sale of the asse mber. If your answer is zero, enter "0". Enter your answers as positive values. stribution of proceeds on liquidation: oceeds from the sale of assets ss: First mortgage (paid from the sale of fixed assets)

uthwestern Wear Inc. has the following balance sheet: $1,875,000 Accounts payable $ 375,000 rrent assets ed assets 1,875,000 Notes payable 750,000 Subordinated debentures 750,000 Total debt $1,875,000 Common equity 1,875,000 $3,750,000 $3,750,000 Total liabilities & equity cal assets e trustee's costs total $310,250, and the firm has no accrued taxes or wages. Southwestern has no unfunded i uidates, how much will each class of investors receive if a total of $2.7 million is received from sale of the asse mber. If your answer is zero, enter "0". Enter your answers as positive values. stribution of proceeds on liquidation: oceeds from the sale of assets ss: First mortgage (paid from the sale of fixed assets)

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

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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…
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarryingAmountNet RealizableValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarryingAmountSettlementAmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidationprocess.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable.QUESTIONS:1. What is the amount paid to unsecured creditors without priority? 2. What is the amount paid to partially secured creditors?
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarryingAmountNet RealizableValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarryingAmountSettlementAmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidationprocess.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable.QUESTIONS:1. How much are the total free assets? _____________2. How much are the unsecured liabilities with priority? _____________3. How much are the…
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarrying AmountNet Realizable ValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarrying AmountSettlement AmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidation process.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable.QUESTIONS:1. How much are the total free assets? _____________2. How much are the unsecured liabilities with priority? _____________3. How much are…
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarrying AmountNet Realizable ValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarrying AmountSettlement AmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidation process.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable. QUESTIONS: 7. What is the amount paid to unsecured creditors without priority? _____________8. What is the amount paid to partially secured…
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarrying AmountNet Realizable ValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarrying AmountSettlement AmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidation process.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable. QUESTIONS: 4. How much are the net free assets? _____________5. What is the estimated deficiency? _____________6. What is the estimated recovery…
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…
A statement of financial affairs created for an insolventcorporation that is beginning the process of liquidation disclosesthe following data (assets are shown at net realizable values): Assets pledged withfully secured creditors $ 220,000 Fully securedliabilities 160,000 Assets pledged withpartially secured creditors 390,000 Partially securedliabilities 510,000 Assets notpledged 310,000 Unsecuredliabilities with priority 182,800 Accounts payable(unsecured) 400,000 a. This company owes $13,000 to an unsecured creditor (withoutpriority). How much money can this creditor expect to collect? b. This company owes $120,000 to a bank on a note payable that issecured by a security interest attached to property with anestimated net realizable value of $90,000. How much money can thisbank expect to collect?
A statement of financial affairs created for an insolvent corporation that is beginning the process of liquidation discloses the following data (assets are shown at net realizable values):Assets pledged with fully secured creditors . . . . . . . . . . . . . . . . $220,000Fully secured liabilities .. . . . 160,000Assets pledged with partially secured creditors . . . . . . . . . . . . . . . 390,000Partially secured liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510,000Assets not pledged . . . . . . 310,000Unsecured liabilities with priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,800Accounts payable (unsecured) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000a. This company owes $13,000 to an unsecured creditor (without priority). How much money can this creditor expect to collect?b. This company owes $120,000 to a bank on a note payable that is secured by a security interest attached to property with an…
The statement of financial position of the firm AA, BB and CC immediately before liquidation shows the following: Assets 640,000 Liabilities 240,000 AA, Loan 64,000 AA, Capital 168,000 BB, Capital 120,000 CC, Capital 48,000 Total 640,000 AA, BB and CC share profits 5:3:2 respectively. Certain assets are sold for P440,000. Creditors are paid in full, partners are paid P140,000 and cash of P60,000 is withheld for contingencies. How much cash is to be distributed to AA?
PROBLEM 5The following information are related to STANK Corporation which isundergoing liquidation:a. A bank loan amounting to P455,000 is secured by inventories withbook value of P525,000 and net realizable value of P350,000.b. Of the P1,120,000 accounts payable, P343,000 is secured byaccounts receivable amounting to P413,000 which is 10%uncollectible.c. Property and equipment costing P875,000 and which is depreciatedby 20% has a net realizable value of P588,000.d. Other unrecorded liabilities are accrued interest payable on bankloan, P45,500; salaries payable, P112,000; taxes payable, P63,000and trustee’s fee, P52,500. e. Cash available before liquidation amounts to P87,500.Compute for the estimated deficiency to unsecured creditors.A. 450,800 C. 927,500B. 882,000 D. 980,000
A corporation has an estimated liquidation value (after all prior claims have been satisfied) of$3,000,000, $1,500,000 from fixed assets, and $1,500,000 from current assets. The firm's value as agoing concern is $4,000,000. The firm's current capital structure is as follows: Debentures - $5,000,000Mortgage Bonds - 2,000,000Preferred Stock - 1,000,000Common Stock - 4,000,000Total = $12,000,000*Secured by fixed assets.Prepare a table indicating the amount, if any, to be distributed to each claimant, in the event ofliquidation.