Chapter 6 Problem I 1. Statement of Affairs - Formal MINER COMPANY Statement of Affairs May 31, 2012 Book Value P 50,000 1,200
119,000
13,200
6,000 61,000 60,000 1,100 8,500
Assets Assets Pledged with Fully Secured Creditors: Notes Receivable P39,800 Accrued Interest Rec. 1,000 P 40,800 Notes Payable Accrued Interest Pay.
40,000 800
Building Note Payable Accrued Interest Pay.
20,000 800
40,800 75,000 20,800
Free Assets Cash Accounts Receivable Inventory Prepaid Insurance Goodwill Total Net Realizable Value Liabilities having Priority – Wages Taxes Net Free Assets
6,000 50,000 30,000 400 0 140,600 6,000 2,400
Estimated Deficiency to Unsecured Creditors
P 6,000 2,400 60,000 1,600 10,000
P 54,200
Assets Pledged with Partially Secured Creditors: Equipment 4,200 Note Payable 10,000
Equities Liabilities Having Priority: Accrued Wages Taxes Payable Fully Secured Creditors: Notes Payable Accrued Interest Payable Partially Secured Creditors: Note Payable Equipment
8,400 132,200 53,600 P 185,800
P 320,000 Book Value
Realizable Value
Unsecured P 6,000 2,400
P 8,400
60,000 1,600
61,600 10,000 4,200
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: Estimated Gains: Accounts Receivable P 11,000 Common Stock P 110,000 Notes Receivable 10,400 Retained Earnings (50,000) Inventory 30,000 Estimated Deficiency to Buildings 44,000 Unsecured Creditors 53,600 Equipment 9,000 Prepaid Insurance 700 Goodwill 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
Book Value P165,000
3,000 72,000 60,000
______ P300,000
Down Dog Corporation Statement of Affairs June 30, 2014
Assets Pledged with partially secured creditors Equipment-net Less: Note payable and accrued interest Unsecured amount (See below) Free Assets Cash Accounts receivable-net Inventories Total net realizable value Less: Priority liabilities – wages payable Total available for unsecured creditors Estimated deficiency to unsecured creditors
Realizable Value P87,000 (96,000) (9,000) 3,000 48,000 72,000 123,000 (45,000) 78,000 30,000 P108,000
Deficiency Account (Loss/Gain) (78,000)
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)
P 45,000
Partially secured creditors Note payable and accrued interest Less: Equipment pledged as security
P 96,000 (87,000)
Liabilities
P 9,000
Unsecured creditors Accounts payable Rent payable
72,000 27,000
Stockholders’ equity Capital stock Retained earnings (deficit)
180,000 (120,000) P 60,000 P(30,000)
______ 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
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
Problem III Realizable value of all assets (P635,000 + P300,000 + P340,000)
49,500 P210,000
P1,275,000
Allocated to: Fully secured creditors Partially secured creditors 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))
(316,000) (300,000) (100,000) P559,000
44.2%
Realizable value of assets: Assets pledged to fully secured creditors Assets pledged to partially secured creditors Free assets Total realizable value
P635,000 300,000 340,000 P1,275,000
Amounts to be paid to: Fully secured creditors Partially secured creditors [P300,000 + (0.442 × P100,000)] Unsecured creditors with priority General unsecured creditors (0.442 × P1,165,000) Total
P316,000 344,200 100,000 514,800* 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 ............................................................
P 90,000 18,000 P108,000
Problem V Free Assets: Cash ........................................................................................ Receivables (30 percent collectible) .......................................... Inventory ........................................................................................ Land (value in excess of secured note: P120,000 – P110,000) ................................................................. Total ........................................................................................
P30,000 15,000 39,000 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) .................................................................
P10,000 P36,000 P110,000 P228,000
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.
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
470,000 P440,000
Less distributions to unsecured claims with priority: Wages payable Taxes payable Amount available for unsecured claims 2.
3.
P 10,000 20,000
Unsecured portion of notes payable and interest (P500,000 + P30,000 – P150,000) Accounts payable Total claims ofunsecured creditors Dividend to Unsecured Creditors P410,000 ÷ P640,000 = 64.1%
30,000 P410,000 P380,000 260,000 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
(2) Assets pledged with partially secured creditors: Marketable securities Less: 10% note payable and interest Inventory Less: Accounts payable
Estimated Amount Available to Unsecured Claims
Estimated Gain (Loss) on Realization
P 40,000 38,500
P 1,500
P 65,000 100,000 P165,000 (157,500)
P 16,000
P 15,000 (10,000) 7,500
(4,000)
(20,800) P 32,000 (60,000)
(3,000)
4,000 35,000 55,000 6,000 140,000 48,000
(3) Free assets: Cash Accounts receivable (net) Inventory Prepaid insurance Plant and equipment (net) Franchises
P 4,000 35,000 50,000 1,000 60,000 15,000
4,000 35,000 50,000 1,000 60,000 15,000
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 543,000
(5,000) (5,000) (80,000) (33,000)
(P 125,000)
2. Percentage to unsecured creditors: P131,000/P176,000 = 74.43% Problem IX
Assets to be realized Old Receivebles, net Marketable Securities Old Inventory Depreciable Assets, net
Smith Company Statement of Realization and Liquidation Assets Assets Realized P 50,000 20,000 72,000 120,000
Assets Acquired New Receivables
Old Receivbles New Receivbles Marketable Securities Sales of Inventory Assets Not Realized
100,000
Old Receivables, net New Receivables, net Depreciable Assets
Supplementary Charges
Supplementary Items Supplementary Credits
Old Current Payables
P 31,000
Liabilities Liquidated Old Current Payables
Net Loss
22,000 35,000 96,000
P 7,000
Liabilities Liabilities to be Liquidated P 31,000
Liabilities Not Liquidated Old Current Payables
P 28,000 65,000 15,000 100,000
Old Current Payables
P 65,000
Liabilities Incurred P 34,000 P433,000
________ 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 pay Partial payment of bank loan Ending balance
Fully Secured P240,000
Partially Secured P270,000
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 With Without Priority Priority P94,000 P0
(10,000) (30,000) (80,000) (30,000)
(240,000) (60,000) (180,000) ________ (90,000) ________ P 0 P 0 P34,000 P 0
Owner's Equity P120,000
10,000 20,000 P30,000
________ 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 10,000 Equipment 100,000 Or, Total estimated proceeds Less asset proceeds claimed by secured creditors:
P440,000 P910,000
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
P150,000 320,000
19. P410,000 Total available to unsecured claimants/total free Less distributions to unsecured claims with priority: Wages payable Taxes payable Amount available for unsecured claims/net free assets
470,000 P440,000
P440,000 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) Accounts payable Total claims of unsecured creditors
P380,000 260,000 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
x
P380,000 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 roundingoff) 27. P230,000 Net free assets (No. 19) P410,000 Less: Unsecured creditors without priority (No. 20) 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
Estimated Amt Avail for Unsecured Creditors
Estimated Gain or (Loss)on Liquidation
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 10,000 Other Accrued Liabilities 185,375 Totals 40,975 Owner Equity 226,350
31. 32. 33. 34. 35. 36. 37. 38.
Estimated Secured Amount
22,200 4,625
(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
_______ 108,975
3,775
P56,900 – refer to No. 30 for computation P72,625 – refer to No. for computation 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
40,625 10,000 72,625
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. P15,725 – refer to No. 30 or P56,700, estimated net loss – P40,975, owners’ equity 40. P56,700 – refer to No. 30 or P169,650 – P226,350 41. P56,700 (same with No. 40 since there are no unrecorded expenses liabilities) 42. P22,475 Liabilities Unsecured Assets Fully Partial With Without Cash Noncash Secured Secured Priority Priority 6/1/x5 Balances: 1,850 224,500 80,975 50,000 3,775 50,625 Cash Receipts: Securities Sale 16,000 N/R Collected 15,000 Equipment 7,000 Sale Inventory Sale 22,000 Cash Disbursements: Bank Loan (10,375) Part Pyt-A/P (29,000) 6/30 Balance 22,475
Owners' Equity 40,975
(5,800) (15,000) (43,000)
10,200 0 (36,000)
(41,000)
(19,000)
---------119,700
(10,375) --------70,600
(50,000) 0
------3,775
21,000 71,625
---------(3,825)
43. P119,700 – refer to No. 42 44. P70,600 – refer to No. 42 45. None – refer to No. 42 46. P3,775 – refer to No. 42 47. P71,625 – refer to No. 42 48. (P3,825) deficit – refer to No. 42 49. P150,900
Book Value 57,000 174,000 6,000 900 90,000
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 Free assets: Notes receivable 6,000 Accrued interest receivable 900 Inventories (90,000 x 60%) 54,000 Estimated amount available for unsecured creditors with and without priority Less unsecured creditors with priority Estimated amounts for unsecured creditors without priority:
Estimated Amount Available for Unsecured Creditor
Estimated Gain or (Loss) on Liquidation
12,600 77,400
(12,000) (24,000)
6,000 900 54,000
0 0 (36,000)
150,900 (26,900)
Net realizable amount available Deficiency 327,900
124,000 26,000
Totals
255,900 Estimated Secured Amount
Book Value 3,600 69,000 2,400 30,000 24,900 0 0 18,000 6,000 126,000
Liabilities and Owners' Equity Fully secured creditors: Accrued interest Note payable Accrued interest Note payable Total Unsecured creditors with priority: Wages payable Administration fees – accountant’s fee Unsecured creditors without priority: Accrued interest Cash overdraft Notes payable Accounts payable
279,900 Totals 48,000 Owners' equity--see Note A 327,900 Note A: Includes the effect of the P2,000 professional fee.
150,000
(72,000)
Estimated Unsecured Amount With Priority
Without Priority
3,600 69,000 2,400 30,000 105,000 24,900 2,000
--------
--------
0 18,000 6,000 126,000
105,000
26,900
150,000
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) 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 ........................................................................................................................... P 120,000 ............................................... Current value of assets pledged with these creditors ................................................................................................................................(80,000) .......................................................................................... Deficiency that is unsecured ........................................................................................................................... P 40,000 ............................................................................. Claims of other unsecured creditors ................................................................................................................................ 360,000 ................................................................................. Total unsecured creditors claims ........................................................................................................................... P 400,000
.................................................................. Amount available to unsecured creditors: ............................................... Excess left over after paying fully secured creditors .................................................................................................... (P195,000 – P150,000) .............................................................................................................................. P 45,000 ......................................................... Current value of free assets (net of P45,000 to .................................................................................................... creditors with priority) ................................................................................................................................ 115,000 ................................................................. Amount available to unsecured creditors .............................................................................................................................. P160,000 Settlement to unsecured claims per dollar (P160,000/P400,000)
P
.40
P
.15
Total distribution to partially secured creditors: Current value of assets pledged P 80,000 Deficiency of P40,000 × P.40 16,000 P 96,000 2. P144,000 = P360,000 x 40% 3. P56,000 ............................................................................ Claims of partially secured creditors ............................................................................................................................. P 90,000 ............................................... Current value of assets pledged with these creditors ................................................................................................................................(50,000) .......................................................................................... Deficiency that is unsecured ............................................................................................................................. P 40,000 ............................................................................. Claims of other unsecured creditors ................................................................................................................................ 200,000 ................................................................................. Total unsecured creditors claims P 240,000 .................................................................. Amount available to unsecured creditors: ............................................... Excess left over after paying fully secured creditors .................................................................................................... (P300,000 – P250,000) ............................................................................................................................. P 50,000 ......................................................... Current value of free assets (net of P60,000 to .................................................................................................... creditors with priority) ................................................................................................................................(14,000) ................................................................. Amount available to unsecured creditors ............................................................................................................................. P 36,000 Settlement to unsecured claims per peso (P36,000/P240,000) Total distribution to partially secured creditors: Current value of assets pledged P 50,000 Deficiency of P40,000 × P.15 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 Unsecured creditors: Excess of partially secured liabilities over pledged assets (P195,000 – P169,000) Accounts payable
P 65,000 13,000 P 78,000 P 78,000 26,000 P 52,000
P
26,000 234,000 P 260,000
18. P174,200 Payment on bond: Value of pledged assets 20%* of remaining P26,000
P 169,000 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 Estimated recovery on unsecured portion (20,000 x P.25) =
(
80,000 60,000 20,000 60,000 5,000
)
Recovery on mortgage note receivable 23. P30,000 Book value of assets Net realizable of assets Less stockholders' equity (P700,000 – P400,000) Deficiency
65,000
P700,000 370,000 P330,000 300,000 P 30,000
24. P.75 Dividend = P370,000 – P250,000 – P30,000 / P400,000 – P250,000 – P30,000 25. P8,500 = P7,000 + [(P9,000 – P7,000) x .75] 26. P410,000 Total estimated proceeds P910,000 Less asset proceeds claimed by secured creditors: Notes payable and interest (from proceeds of receivables and inventory) P150,000 Mortgage payable and interest (from proceeds of land and building) 320,000 470,000 Total available to unsecured claimants. P440,000 Less distributions to unsecured claims with priority: Wages payable P 10,000 Taxes payable 20,000 30,000 Amount available for unsecured creditors P410,000 27. 64.10% Unsecured portion of notes payable and interest (P500,000 + P30,000 – P150,000) Accounts payable Total claims of unsecured creditors
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 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
P380,000 x 64.1% P243,580 150,000 P393,580
5. 6. 7. 8. 9.
10. 11. 12. 13. 44.
45. 46. 47. 48.
d. employee benefit plans e. deposits by individuals f. taxes infrequent two-thirds, more than one-half fraudulent, preferential realization and liquidation False False False True False
a c c a b
14.
15. 16. 17. 18.
False True True True True
c 50. d 51. a 52. d 53. b 49.
19.
20. 21. 22. 23. 54.
55. 56. 57. 58.
False False
c a a d c d
b a
24.
25. 26. 27. 28.
c a d c
e
59. a 60. c
29.
30. 31. 32. 33.
b b b a
c
34.
35. 36. 37. 38.
b d b c
a
39.
40. 41. 42. 43.
b c b a
c
