ADVANCED ACCOUNTING
14th Edition
ISBN: 9781260361681
Author: Hoyle
Publisher: MCG
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Textbook Question
Chapter 13, Problem 45P
The following balance sheet has been prepared by the accountant for Limestone Company as of June 3, 2017, the date on which the company is to file a voluntary petition of bankruptcy:
LIMESTONE COMPANY Balance Sheet June 3, 2017 Assets |
|
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $ 3,000 |
65,000 | |
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 88,000 |
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 100,000 |
Buildings (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 300,000 |
Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 180,000 |
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $736,000 |
Liabilities and Equities | |
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $ 98,000 |
Notes payable—current | |
(secured by equipment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 250,000 |
Notes payable—long term | |
(secured by land and buildings) . . . . . . . . . . . . . . . . . . . . . . . . . . . | 190,000 |
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 120,000 |
78,000 | |
Total liabilities and equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $736,000 |
Additional Information
- If the company is liquidated, administrative expenses are estimated at $18,000.
- The accounts payable figure includes $10,000 in wages earned by the company’s 12 employees during May. No one earned more than $2,200.
- Liabilities do not include taxes of $14,000 owed to the U.S. government.
- Company officials estimate that 40 percent of the accounts receivable will be collected in a liquidation and that the inventory disposal will bring $80,000. The land and buildings will be sold together for approximately $310,000; the equipment should bring $130,000 at auction.
Prepare a statement of financial affairs for Limestone Company as of June 3, 2017.
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Casper Blueprinting, Inc., has filed under Chapter 7 of the Bankruptcy Code. The estimated net realizable value of its assets is as follows:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,000Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,000Inventory and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000Blueprinting equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000Deliver vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000Total. . . . . . . . . . . . . . . . .…
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Cash . . . . . . . . . . . . . . . . . . $ 30,000 Receivables (30% collectible) . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 50,000Inventory (worth $39,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 90,000Land (worth $120,000) (secures note payable) . . . . . . . . . . . . . . . 100,000Buildings (worth $180,000) (secures bonds payable) . . . . . . . . . . 200,000. Salaries payable (Four workers owed equal amounts for last two weeks) . . . 10,000Accounts payable . . . . . . . . . .90,000Note payable (secured by land) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000Bonds payable (secured by building) . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 100,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .…
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…
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