Chapter 6 Problem I 1. Statement of Affairs - Formal
MINER COMPANY Statement of Affairs May 31, 2012
Assets
Book Value
Realizable Value
P 50,000
Assets Pledged with Fully Secured Creditors: Notes Receivable
1,200
Accrued Interest Rec. Notes Payable
P39,800 1,000
P 40,800
40,000 800
40,800
Accrued Interest Pay.
119,000
Building Note Payable Accrued Interest Pay.
75,000 20,000 800
20,800
P 54,200
Assets Pledged with Partially Secured Creditors: 13,200 Equipment
4,200 10,000
Note Payable
6,000 61,000 60,000 1,100
Free Assets Cash Accounts Receivable Inventory Prepaid Insurance Goodwill
6,000 50,000 30,000 400 0
8,500 Total Net Realizable Value
140,600
Liabilities having Priority – Wages 6,000 Taxes
8,400 2,400
Net Free Assets
132,200
Estimated Deficiency to Unsecured Creditors
P 320,000
Book Value
53,600
P 185,800
Unsecure d
Equities Liabilities Having Priority:
P 6,000
P 6,000 Accrued Wages
2,400
2,400
P 8,400
Taxes Payable
60,000 1,600
Fully Secured Creditors: Notes Payable Accrued Interest Payable
60,000 1,600 61,600
10,000
Partially Secured Creditors:
10,000
Note Payable 4,200 Equipment
P 5,800
170,000 10,000 110,000 ( 50,000) P 320,000
Unsecured Creditors: Accounts Payable Notes Payable
170,000 10,000
Stockholders’ Equity Common Stock Retained Earnings (Deficit)
P 185,800
2. Deficiency Statement to determine estimated deficiency to unsecured creditors:
Deficiency Account May 31, 2012
Estimated Losses:
Accounts Receivable
Estimated Gains:
P 11,000
Common Stock
P 110,000
(50,000)
Notes Receivable
10,400
Retained Earnings
Inventory
30,000
Estimated Deficiency to
Buildings
44,000
Unsecured Creditors
Equipment
Prepaid Insurance
Goodwill
53,60 0
9,000
700
8,500
P113,600
P 113,600
Estimated final dividend rate to unsecured creditors is: P132,200/P185,800 = 71.15% Problem II 1. Formal
Down Dog Corporation
Statement of Affairs June 30, 2014
Book Value P165,000
3,000 72,000 60,000
______ P300,000
Assets Pledged with partially secured creditors Equipment-net P87,000 Less: Note payable and accrued interest (96,000) Unsecured amount (See below) (9,000) Free Assets Cash 3,000 Accounts receivable-net 48,000 Inventories 72,000 Total net realizable value 123,000 Less: Priority liabilities – wages payable (45,000) Total available for unsecured creditors 78,000 Estimated deficiency to unsecured creditors 30,000 P108,000
Deficiency Account Realizable Value (Loss/Gain) P
0
(24,000) 12,000
______ (90,000)
Unsecured Equities
Book Value P 45,000
96,000
72,000 27,000 180,000 (120,000) P300,000
Priority liabilities Wages payable (assumed under P4,650 per employee) Partially secured creditors Note payable and accrued interest Less: Equipment pledged as security
Liabilities
P 45,000 P 96,000 (87,000)
Unsecured creditors Accounts payable Rent payable
P 9,000 72,000 27,000
Stockholders’ equity Capital stock Retained earnings (deficit)
______ P108,000
Estimated Deficiency
2. Estimated payments per dollar for unsecured creditors Cash available Distribution to partially secured and unsecured priority creditors: Note payable and interest P87,000 Administrative expenses 24,000 Wages payable 45,000 Available to unsecured nonpriority creditors
180,000 (120,000) P 60,000 P(30,000)
P210,000
(156,000) P 54,000
Note payable and interest (unsecured portion) Accounts payable Rent payable Unsecured nonpriority claims
P 9,000 72,000 27,000 P108,000
(P54,000 / P108,000 = P0.50 per peso) Expected recovery for each class of claims Partially secured Note payable and interest Secured portion Unsecured portion (P9,000 × 0.50)
P87,000 4,500
P91,500
Unsecured priority Administrative expenses Wages payable
P24,000 45,000
69,000
Unsecured nonpriority Accounts payable (P72,000 × 0.50 Rent payable (P27,000 × 0.50) Total payments
P36,000 13,500
49,500 P210,000
Problem III Realizable value of all assets (P635,000 + P300,000 + P340,000)P1,275,000 Allocated to: Fully secured creditors (316,000) Partially secured creditors (300,000)
Unsecured creditors with priority Remainder available to general unsecured creditors Payment rate to general unsecured creditors (Including balance due to partially secured creditors) P559,000 / (P1,165,000 + (P400,000 - P300,000)) Realizable value of assets: Assets pledged to fully secured creditors Assets pledged to partially secured creditors Free assets Total realizable value
(100,000) P559,000
44.2% P635,000 300,000 340,000 P1,275,000
Amounts to be paid to: Fully secured creditors P316,000 Partially secured creditors [P300,000 + (0.442 × P100,000)] 344,200 Unsecured creditors with priority 100,000 General unsecured creditors (0.442 × P1,165,000) 514,800* Total P1,275,000 *Rounded P130 Problem IV Free Assets: Current Assets .................................................................. Buildings and Equipment ................................................. Total .........................................................................
P 35,000 110,000 P145,000
Liabilities with Priority: Administrative Expenses .................................................. Salaries Payable (only P3,000 per employee)................... Income Taxes ................................................................... Total .........................................................................
P 20,000 6,000 8,000 P 34,000
Free Assets After Payment of Liabilities with Priority (P145,000 – P34,000) ......................................................
P111,000
Unsecured Liabilities Notes Payable (in excess of value of security) ................. Accounts Payable ............................................................. Bonds Payable .................................................................. Total .........................................................................
P 30,000 85,000 70,000 P185,000
Percentage of Unsecured Liabilities To Be Paid: P111,000/P185,000 = 60 % Payment On Notes Payable: Value of Security (land) .................................................... 60% of Remaining P30,000 .............................................. Total Collected by holders ................................................ Problem V Free Assets: Cash ......................................................................... Receivables (30 percent collectible).................................. Inventory .........................................................................
P 90,000 18,000 P108,000
P30,000 15,000 39,000
Land (value in excess of secured note: P120,000 – P110,000).................................................. Total .........................................................................
10,000 P94,000
Less: Liabilities with priority Salary payable (below maximum)............................... Free assets available...................................................
(10,000) P84,000
Unsecured Liabilities: Accounts payable.............................................................. Bonds payable (less secured interest in building: P300,000 – P180,000)................................... Unsecured liabilities....................................................
P90,000 120,000 P210,000
Percentage of unsecured liabilities to be paid: P84,000/P210,000 = 40% Amounts to be paid for: Salary payable (liability with priority to be paid in full) ......................................................................... Accounts payable (unsecured—will collect 40% of debts of P90,000).................................................... Note payable (fully secured by land—will collect entire balance)........................................................... Bonds payable (partially secured—will collect P180,000 from building and 40 percent of the remaining P120,000)................................................... Problem VI
Class of Creditors Fully secured liabilities Partially secured liabilities Unsecured liabilities with priority Unsecured liabilities without priority
Total Creditor’s Claims 183,600 54,600 30,810 182,500
Problem VII 1. Total estimated proceeds Less asset proceeds claimed by secured creditors: Notes payable and interest (from proceeds of receivables and inventory) Mortgage payable and interest (from proceeds of land and building) Total available to unsecured claimants. Less distributions to unsecured claims with priority: Wages payable Taxes payable Amount available for unsecured claims 2.
Unsecured portion of notes payable and interest (P500,000 + P30,000 – P150,000)
P10,000 P36,000 P110,000 P228,000
Total Amounts Expected to be Recovered 183,600 51,720 30,810 116,800
% of Total Claims Expected to be Recovered 100.0 94.7 100.0 64.0 P910,000
P150,000 320,000
P 10,000 20,000
470,000 P440,000
30,000 P410,000 P380,000
Accounts payable Total claims ofunsecured creditors Dividend to Unsecured Creditors P410,000 ÷ P640,000 = 64.1% 3.
260,000 P640,000
Unsecured portion of notes payable and Interest Dividend on unsecured amount Amount received on unsecured portion Proceeds from receivables and inventory Total Received
P380,000 64.1% P243,580 150,000 P393,580
Dividend to note holders: P393,580 ÷ P530,000 = 74.3% Problem VIII 1.
WILBUR CORPORATION STATEMENT OF AFFAIRS DECEMBER 31, 20x4 Assets Estimated Current Values
Book Value
P 40,000
50,000 110,000
(1) Assets pledged with fully secured creditors: Accounts receivable (net) Less: 10% note payable and interest Land Plant and equipment (net) Less: Mortgages payable and interest
20,000
35,000
4,000 35,000 55,000 6,000 140,000 48,000
(2) Assets pledged with partially secured creditors: Marketable securities Less: 10% note payable and interest Inventory Less: Accounts payable (3) Free assets: Cash Accounts receivable (net) Inventory Prepaid insurance Plant and equipment (net) Franchises
Estimated Amount Available to Unsecured Claims
Estimated Gain (Loss) on Realizatio n
P 40,000 38,500
P 1,500
P 65,000 100,000 P165,000 (157,500)
P 15,000 (10,000) 7,500
P 16,000
(4,000)
(20,800) P 32,000 (60,000) P 4,000 35,000 50,000 1,000 60,000 15,000
(3,000)
4,000 35,000 50,000 1,000 60,000 15,000
(5,000) (5,000) (80,000) (33,000)
P 543,000
Estimated amount available Less: Creditors with priority Net available to unsecured creditors Estimated deficiency
P 174,000 (43,000) P 131,000 45,000
Total unsecured debt
P 176,000
(P 125,000)
2. Percentage to unsecured creditors: P131,000/P176,000 = 74.43% Problem IX
Assets to be realized Old Receivebles, net 50,000 Marketable Securities 20,000 Old Inventory 72,000 Depreciable Assets, net 120,000
Smith Company Statement of Realization and Liquidation Assets Assets Realized P
Old Receivbles 28,000 New Receivbles 65,000 Marketable Securities 15,000 Sales of Inventory 100,000
Assets Acquired
Assets Not Realized
New Receivables 100,000
Old Receivables, net 22,000 New Receivables, net 35,000 Depreciable Assets 96,000
Supplementary Charges Old Current Payables 31,000
Supplementary Items Supplementary Credits P
Net Loss 7,000
P
Liabilities Not Liquidated Old Current Payables 34,000
P
Liabilities Liabilities to be Liquidated
Liabilities Liquidated Old Current Payables 31,000
P
Old Current Payables
P 65,000
Liabilities Incurred P P43 3,000
_____ ___
P 433,000
Problem X Mallory Corporation Statement of Realization and Liquidation For the Three Months Ended July 31, 20x5 Assets Cash Non-Cash P 4,000 P720,000
Assets Beginning balances assigned 5/1/x5 Cash Receipts: Collection of Accounts Receivable Sale of inventory Sale of land and building Sale of machinery Cash Disbursements: Payment of salaries payable Partial payment of accounts pay. Partial payment of bank loan Ending balance
Assets Beginning balances assigned 5/1/X5Receipts: Cash Collection of Accounts Receivable Sale of inventory Sale of land and building Sale of machinery Cash Disbursements: Payment of salaries payable Partial payment of accounts payPartial payment of bank loan Ending balance
Fully Secured P240,00 0
(240,00 0)
________ P 0 P
60,000 170,000 20,000 70,000
(70,000) (200,000) (340,000) (100,000)
(60,000) (170,000) (70,000) P24,000
P10,000
Liabilities Unsecured Partially With Without Owner's Secured Priority Priority Equity P270,00 P94,000 P 0 P120,000 0 (10,000) (30,000) (80,000) (30,000) (60,000 ) (180,00 10,000 0) (90,000) ________ 20,000 P P34,000 P30,000 0
________ P (30,000)
Multiple Choice Problems 1. d – since there is parent and subsidiary relationship, any intercompany accounts are eliminated from consolidated point of view. 2. a - [P90,000 + P36,000 + P10,000 – P45,000 = P91,000 total estimated amount available; P91,000 – (P4,500 + P10,000) = P76,500 estimated amount available for unsecured, non-priority creditors; P76,500 P90,000 = 0.85] 3. c – it is a partially secured liability
4. d – [(P1,110,000 – P780,000) + P960,000] – P210,000 = P1,080,000
5. b – P25,000 + [.30 x (P75,000 – P25,000)] = P40,000
6. d – (P555,000 – P390,000) + P480,000 = P645,000 – P105,000 = P540,000
7. b – P30,000 + [.30 x (P90,000 – P30,000)] = P48,000
8. c – [ P110,000 + (P150,000 – P110,000) x 40%] = P128,000
9. d
10. c – P60,000 + [(P120,000 + P6,000) – (P30,000 + P35,000) = P121,000
11. b - P20,000 + P80,000 + [P170,000 – (P150,000 + P7,000)] = P113,000 – (P10,000 + P10,000) = P93,000
12. c – P93,000/P121,000 = 77% rounded.
13. a Net Free Assets: (P700,000 – P300,000) + P70,000 + P230,000 = P700,000 – P140,000 = P560,000 Total Unsecured Creditors without priority: (P400,000 – P300,000) + P600,000 = P700,000
14. c - Pension P10,000 + Salaries P35,000 (= P10,600 + P10,950 + P10,950 + P2,500) + Taxes P80,000 + Liq. expenses P40,000 = P165,000.
15. c
Statement of Realization and Liquidation Assets to be Realized…………. Assets Acquired……………….. Liabilities Liquidated…………. Liabilities Not Liquidated……. Supplementary charges/ debits………………………
P 1,375,000 750,000 1,875,000 1,700,000
Assets Realized…………………..P 1,200,000 Assets Not Realized…………… 1,375,000 Liabilities to be Liquidated…. 2,250,000 Liabilities Assumed………….. 1,625,000 Supplementary credits……… 2,800,000
3,125,000 P 8,825,000
P 9,250,000
Net Gain……………………….. P 425,000
16. No requirement 17. c Total Liabilities (refer to Liabilities not liquidated–No. 14)…………………… P1,700,000 +: Stockholders’ Equity (P1,500,000 – P500,000)………………………………… 1,000,000 Total LSHE = Total Assets…………………………………………………………… P 2,700,000 -: Noncash assets (refer to Assets not realized-No. 14)……….……………… 1,375,000 Cash balance, ending………………………………………………………………P1,325,000
18. P440,000 Total Free Assets: Fully secured: Land and building: P650,000 – (P300,000 + P20,000) = P 330,000 Free assets: Cash Equipment
10,000 100,000
P440,000
Or, Total estimated proceeds Less asset proceeds claimed by secured creditors: Notes payable and interest (from proceeds of receivables and inventory) Mortgage payable and interest (from proceeds of land and building) Total available to unsecured claimants/total free 19. P410,000 Total available to unsecured claimants/total free Less distributions to unsecured claims with priority:
P910,000
P150,000 320,000
470,000 P440,000 P440,000
Wages payable Taxes payable Amount available for unsecured claims/net free assets
P 10,000 20,000
30,000 P410,000
20. P640,000 = P260,000 + [(P50,000 + P100,000) – (P500,000 + 30,000), or Unsecured portion of notes payable and interest (P500,000 + P30,000 – P150,000) P380,000 Accounts payable 260,000 Total claims of unsecured creditors P640,000
21. 64.1% Dividend to unsecured creditors P410,000 ÷ P640,000 = 64.1% 22. P320,000 = P300,000 + P20,000 23. P393,580 Unsecured portion of notes payable and interest Dividend on unsecured amount Amount received on unsecured portion Proceeds from receivables and inventory Total Received
P380,000 x 64.1% P243,580 150,000 P393,580
Dividend to note holders: P393,580 ÷ P530,000 = 74.3%
24. P30,000 25. P166,666 = P260,000 x 64.1 26. P910,247 = P320,000 + P393,580 + P30,000 + P166,666 (discrepancy of P247 due to rounding-off) 27. P230,000 Net free assets (No. 19) Less: Unsecured creditors without priority (No. 20)
P410,000 640,000 P230,000
28. P340,000 = P910,000 – P1,250,000
29. P340,000, same with No. 28, since there are no unrecorded expenses liabilities)
30. P60,675 – you may the same procedure in Nos. 18 to 29 to solve this problem, the following is the formal presentation of statement of affairs
Estimated Net Realizable Value
Book Value Assets Assets pledged with fully secured creditors: 98,500 Land and Bldg 92,800 5,800 Investment in Calandir 15,000 Total 107,800 Assets pledged with partially secured creditors: 41,000 Inventory 20,000 43,000 Equipment 8,000 Free Assets: 1,850 Cash 1,850 21,200 Accounts Rec 17,000 15,000 Note Rec 15,000 Estimated Amount Avail for unsecured creditors with and without priority Less unsecured creditors with priority Estimated amounts for unsecured creditors without priority (Net Free Assets): Net Realizable Amount Avail _______ Deficiency _______ 226,350 169,650 Book Liabilities Value and Owners Equity Fully Secured Creditors: 600 Accrued Mtg Interest 70,000 Mortgage Payable 375 Accrued N/P Interest 10,000 Note Payable Total Partially Secured Creditors: 50,000 Accounts Payable Unsecured Creditors with Priority: 3,775 Accrued Payroll Unsecured creditors without Priority: 40,625 Accounts Payable 10,00 Other Accrued Liabilities 0 185,375 Totals 40,975 Owner Equity 226,350
Estimated Secured Amount
Estimated Amt Avail for Unsecured Creditors 22,200 4,625
Estimated Gain or (Loss)on Liquidation (5,700) 9,200
(21,000) (35,000) 1,850 17,000 15,000
0 (4,200) 0
60,675 (3,775) 56,900 15,725 72,625
_______ (56,700)
Estimated Unsecured Amount With Without Priority Priority
600 70,000 375 10,000 80,975 28,000
22,000 3,775 40,625 10,000
_______ 108,975
31. P56,900 – refer to No. 30 for computation 32. P72,625 – refer to No. for computation
3,775
72,625
33. 34. 35. 36. 37. 38.
Dividend - P56,900/P72,625 = P.78 – refer to No. 30 for further computation P80,975 – refer to No. 30 for computation P45,160 = P28,000 + (P22,000 x 78%) P3,775 P39,487.50 = 78% x (P40,625 + P10,000) P169,397.50 No. 34……………..P 80.975 No. 35…………….. 45,160 No. 36…………….. 3,775 No. 37…………….. 39,487.50 P169,397.50 (discrepancy around P250 plus due to rounding-off)
39. 40. 41. 42.
P15,725 – refer to No. 30 or P56,700, estimated net loss – P40,975, owners’ equity P56,700 – refer to No. 30 or P169,650 – P226,350 P56,700 (same with No. 40 since there are no unrecorded expenses liabilities) P22,475 Liabilities Unsecured Assets Fully Partial With Without Owners' Cash Noncash Secured Secured Priority Priority Equity 6/1/x5 Balances: 1,850 224,500 80,975 50,000 3,775 50,625 40,975 Cash Receipts: Securities 16,000 (5,800) Sale N/R Collected 15,000 (15,000) Equipment 7,000 (43,000) Sale Inventory 22,000 (41,000) Sale Cash Disbursements: Bank Loan (10,375 ) Part Pyt-A/P (29,000 ---------) 6/30 Balance 22,475 119,700
43. 44. 45. 46. 47. 48.
10,200 0 (36,000 ) (19,000 ) (10,375 ) --------70,600
(50,000 ) 0
-------
21,000
----------
3,775
71,625
(3,825)
P119,700 – refer to No. 42 P70,600 – refer to No. 42 None – refer to No. 42 P3,775 – refer to No. 42 P71,625 – refer to No. 42 (P3,825) deficit – refer to No. 42
49. P150,900
Book Value 57,000 174,000
Estimated Net Realizable Assets Value Assets pledged with fully secured creditors: Accounts receivable (net) 45,000 Land, plant and equipment (net) 150,000 Total 195,000
Estimated Amount Available for Unsecured Creditor 12,600 77,400
Estimated Gain or (Loss) on Liquidation (12,000) (24,000)
6,000 900 90,000
Free assets: Notes receivable Accrued interest receivable Inventories (90,000 x 60%) Estimated amount available for unsecured creditors with and without priority Less unsecured creditors with priority Estimated amounts for unsecured creditors without priority: Net realizable amount available Deficiency
327,900
Totals
6,000 900 54,000
6,000 900 54,000
0 0 (36,000)
150,900 (26,900) 124,000 26,000 255,900 Estimated Secured Amount
150,000
(72,000)
Estimated Unsecured Amount
Book Value Liabilities and Owners' Equity With Priority Fully secured creditors: 3,600 Accrued interest 3,600 69,000 Note payable 69,000 2,400 Accrued interest 2,400 30,000 Note payable 30,000 Total 105,000 Unsecured creditors with priority: 24,900 Wages payable 24,900 Administration fees – 0 accountant’s fee 2,000 Unsecured creditors without priority: 0 Accrued interest 18,000 Cash overdraft 6,000 Notes payable 126,000 Accounts payable --------------279,900 Totals 105,000 26,900 48,000 Owners' equity--see Note A 327,900 Note A: Includes the effect of the P2,000 professional fee.
50. P124,000 – refer to No. 49 51. P150,000– 52. 82.67% = P124,000/P150,000 53. P105,000 54. None 55. P26,900 56. P124,005 = P150,000 x 82.67% 57. P255,900 = P72,000 + P26,900 + P124,005 (discrepancy of P5)
Without Priority
0 18,000 6,000 126,000 150,000
58. P26,000 = (P72,000 + P2,000 unrecorded ) – P48,000 or P150,000 – P124,000 59. P72,000 – refer to No. 49 60. P74,000 = P72,000, loss of realization of assets + P2,000 unrecorded expenses
Quiz - VI 1. P96,000 Claims of partially secured creditors.................................................. Current value of assets pledged with these creditors............................ Deficiency that is unsecured.................................................................. Claims of other unsecured creditors.................................................... Total unsecured creditors claims........................................................ Amount available to unsecured creditors: Excess left over after paying fully secured creditors (P195,000 – P150,000)........................................................................ Current value of free assets (net of P45,000 to creditors with priority)................................................................... Amount available to unsecured creditors.......................................... Settlement to unsecured claims per dollar (P160,000/P400,000).......... Total distribution to partially secured creditors: Current value of assets pledged.......................................................... Deficiency of P40,000 × P.40...............................................................
P 120,000 (80,000) P 40,000 360,000 P 400,000
P 45,000 115,000 P160,000 P
.40
P 80,000 16,000 P 96,000
2. P144,000 = P360,000 x 40% 3. P56,000 Claims of partially secured creditors.................................................. Current value of assets pledged with these creditors............................ Deficiency that is unsecured.................................................................. Claims of other unsecured creditors.................................................... Total unsecured creditors claims........................................................ Amount available to unsecured creditors: Excess left over after paying fully secured creditors (P300,000 – P250,000)........................................................................ Current value of free assets (net of P60,000 to creditors with priority)................................................................... Amount available to unsecured creditors.......................................... Settlement to unsecured claims per peso (P36,000/P240,000).............. Total distribution to partially secured creditors:
P 90,000 (50,000) P 40,000 200,000 P 240,000
P 50,000 (14,000) P 36,000 P
.15
Current value of assets pledged.......................................................... Deficiency of P40,000 × P.15...............................................................
P 50,000 6,000 P 56,000
4. P30,000 = P200,000 x 15% 5. P35,000 = P20,000 + (P70,000 – P20,000) x 30% 6. P96,000 = Free assets P220,000 - priority claims P100,000 = P120,000 P120,000/P300,000 unsecured = payment of 40% on unsecured peso 40% x P240,000 A/P = P96,000 7. P474,000 = Land and building sold for P450,000 leaves P60,000 unsecured still owing. 40% x P60,000 = P24,000 8. P295,000 = P200,000 + P95,000 9. P42,950 - (P10,950 + P2,000 + P20,000 + P10,000) 10. P76,050 - Excess of salaries, P1,050 + notes pay in excess of security P25,000 + accounts pay P50,000 11. P163,800 Free assets: Other assets P104,000 Excess from assets pledged with secured (P150,800 – P91,000) 59,800 P163,800 12. P109,200 Total free assets P163,800 Less: Liabilities with priority 54,600 P109,200 13. P364,000 Unsecured creditors: Excess of partially secured liabilities over Pledged assets (P169,000 – P65,000) P104,000 Unsecured creditors 260,000 P364,000 14. P96,200 Payment of partially secured debt: Value of pledged assets P 65,000 30%* of remaining P104,000 31,200 P 96,200 *P109,200/P364,000 = 30%
15. P78,000 Cash Excess of pledged with secured liabilities (P117,000 – P104,000) 16. P52,000 Free assets after of liabilities with priority: Total free assets Less: Liabilities with priority 17. P260,000
P 65,000 P 78,000
13,000
P 78,000 26,000 P 52,000
Unsecured creditors: Excess of partially secured liabilities over pledged assets (P195,000 – P169,000) P 26,000 Accounts payable 234,000 P 260,000 18. P174,200 Payment on bond: Value of pledged assets P 169,000 20%* of remaining P26,000 5,200 P 174,200 Free after priority: P52,000/P260,000 = 20% 19. P247,000 Free assets Excess from assets pledged with fully secured (P260,000 – P195,000) Amount available Unsecured liabilities with priority Net free assets / available for unsecured
P390,000 65,000 P455,000 ( 208,000) P247,000
20. P32,000 Cash Mortgage payable, paid in full
(
Note payable to bank, secured portion
(
Priority claims (P16,000 of administrative costs + P2,000 of customer deposits + P4,000 property tax) Available for unsecured nonpriority claims
(
120,000 60,000 ) 60,000 30,000 ) 30,000 22,000 ) 8,000
Unsecured, nonpriority claims: Unsecured portion of note payable to bank Accounts payable Total unsecured, nonpriority claims
10,000 30,000 40,000
P8,000 cash/P40,000 claims = P.20 on the dollar Amount paid to bank: P30,000 for secured portion + (P10,000 x .20) for unsecured portion =
32,000
21. P15,400 Mortgage note receivable Less: Portion secured by equipment Unsecured portion
(
Estimated recovery on secured portion Estimated recovery on unsecured portion (P28,000 x P.30) = Recovery on mortgage note receivable
35,000 7,000 28,000
)
7,000 8,400 15,400
22. Mortgage note receivable Less: Portion secured by marketable securities Unsecured portion Estimated recovery on secured portion
(
80,000 60,000 20,000 60,000
)
Estimated recovery on unsecured portion (20,000 x P.25) = Recovery on mortgage note receivable
5,000 65,000
23. P30,000 Book value of assets Net realizable of assets
P700,000 370,000 P330,000
Less stockholders' equity (P700,000 – P400,000) Deficiency 24 . 25 . 26 .
27 .
300,000 P 30,000
P.75 Dividend = P370,000 – P250,000 – P30,000 / P400,000 – P250,000 – P30,000 P8,500 = P7,000 + [(P9,000 – P7,000) x .75] P410,000 Total estimated proceeds Less asset proceeds claimed by secured creditors: Notes payable and interest (from proceeds of receivables and inventory) Mortgage payable and interest (from proceeds of land and building) Total available to unsecured claimants. Less distributions to unsecured claims with priority: Wages payable Taxes payable Amount available for unsecured creditors
P910,000
P150,000 320,000
P 10,000 20,000
64.10% Unsecured portion of notes payable and interest (P500,000 + P30,000 – P150,000) Accounts payable Total claims of unsecured creditors
470,000 P440,000
30,000 P410,000
P380,000 260,000 P640,000
Dividend to unsecured creditors: P410,000 ÷ P640,000 = 64.1% 28 .
Unsecured portion of notes payable and Interest Dividend on unsecured amount Amount received on unsecured portion Proceeds from receivables and inventory Total Received Dividend to note holders: P393,580 ÷ P530,000 = 74.3%
THEORIES 1. debtor
P380,000 x 64.1% P243,580 150,000 P393,580
2. P5,000 3. inability to pay debts as they mature 4. a. administrative costs b. certain postfiling “gap” claims in involuntary filings c. wages, salaries, and commissions d. employee benefit plans e. deposits by individuals f. taxes 5. infrequent 6. two-thirds, more than one-half 7. fraudulent, preferential 8. realization and liquidation 9.
False
14 .
False
19 .
False
24 .
c
29 .
b
34.
b
39 .
b
10 . 11 . 12 . 13 .
False
15 . 16 . 17 . 18 .
True
20 . 21 . 22 . 23 .
False
25 . 26 . 27 . 28 .
a
30 . 31 . 32 . 33 .
b
35 . 36 . 37 . 38 .
d
40 . 41 . 42 . 43 .
c
44.
a
49.
c
54.
d
a
45 . 46 . 47 . 48 .
c
50 . 51 . 52 . 53 .
d
55 . 56 . 57 . 58 .
c
59 . 60 .
False True False
c a b
True True True
a
d b
c a a
d
b a
d c
e
c
b a
c
b c
a
b a
c
