Multiple Choices Questions
1. Philippin Philippinee National National Bank holds holds a P500,000 P500,000 note note secured secured by a building building owned owned by Luigi Software, which has filed bankruptcy. If the property has a book value of P600,000 and a fair market value of P450,000, what is the best way to describe the notes held by Philippine National Bank? The bank has a. A sec secur ured ed clai claim m of P500, P500,00 000 0 b. An unsecur unsecured ed claim claim of P500,00 P500,000 0 c. A secured secured claim of P450,000 P450,000 and and an unsecured unsecured claim of P50,000 P50,000 d. A secured secured claim claim of P50,000 P50,000 and an an unsecured unsecured claim claim of P50,000 P50,000 2. X and Y Inc. Inc. owes the Xylo Xylo Corporati Corporation on P60,000 P60,000 on account, account, which which is secured secured by by accounts receivable with a book value of P50,000. The unsecured portion is considered claim under the bankruptcy law, X and y has filed for bankruptcy. bank ruptcy. It’s the statement opf affairs lists the accounts receivable securing the Xylo accoun t with an estimated realizable value of P45,000. If the dividend to general unsecured creditors c reditors is 80%, how much can Xylo expect to receive? a. P 60,000 c. P57,000 b. 58,000 d. 48,000 3. P Corporati Corporation on is a parent, parent, having having purchased purchased 60% 60% of S Company’s Company’s common common stock stock at par value for P600,000. S Company is in financial difficulty. The parent granted an unsecured loan of P200,000 to the subsidiary. An accounting statement affairs for S Company shows a dividend of 30%. P Corporation can expect to receive on the loan of appropriately: a. P120,000 c.P36,000 b. P 60,000 d. P 0 4. P Corporati Corporation on is a parent, parent, having having purchased purchased 60% 60% of S Company’s Company’s stock stock at par par value for P600,000. S Company is in financial difficulty. The parent granted as unsecured loan of P200,000 to the dividend of affairs for S Company shows a dividend of 30%. P Corporation can expect to receive payment for its Investment in S Company of approximately: a. P600 P600,0 ,000 00 c. P108 P108,0 ,000 00 b. b. 180, 180,00 000 0 d. P 0 5. Kent, Inc. Inc. has forced into bankrupt bankruptcy cy and has has begun to to liquidate. liquidate. Unsecur Unsecured ed claims will be paid at the rate of 40 cents on the peso. Apex Co. holds a noninterest bearing note receivable from Kent in the amount of P100,000, collateralized by machinery with a liquidation value of P25,0 00. The total amount realized by Apex in this note receivable is: a. P25,000 c. P55,000 b. b. P40, P40,00 000 0 d. P65, P65,00 000 0 6. Seco Corporat Corporation ion was forced forced into into bankruptcy bankruptcy and is in the process process of liquid liquidating ating assets and paying claims. Unsecured claims will be paid at the rate of forty cents
on the peso. Hale holds a P30,000 non-interest bearing note receivable from Seco collateralized by an asset with the book value of P35,000 and a liquidation value of P5,000. The amount to be realized by Hale on this note is a. P5,000 c. P15,000 b. P12,000 d. P17,000 7. Blueprint, Inc. signed note payable to its bank for P100,000. Accrued interest on the note on February 28,2004 amounts of P250. The note is secured by inventory with a book value of P12,000. The inventory is sold for P8,000 and unsecured creditors received 30% of their claims. The bank should receive the following amount in settlement of the note and interest: a. P10,250 c. P8,675 b. P10,000 d. P8,000 8. The trust for Ardolio, Inc. prepares a statement of affairs which shows that unsecured creditors whose claims total P60,000 may expect to receive approximately P36,000 if assets are sold for the benefit of the creditors. Michael is an employee who is owed P750. Meldan holds a note for P1,000 on which interest of P50 is accrued; nothing has been pledged on the note Compboy holds a note for P6,000 on which interest of P300 is accrued; securities with a book value of P6,500 and a present market value of P5,000 are pledged on the note. Serpor holds a note for P2,500 on which interest of P150 is accrued property with a book value of P2,000 and a present market value of P3,000 is pledged on the note. How much may each of the following creditors hope to receive?
a. b. c. d.
Michael P0 90 350 750
Meldan P0 0 1,050 630
Compboy P0 6,300 5,780 5,780
Serpor P0 2,390 0 2,650
9. Erap Co. filed a voluntary bankruptcy petition on August 15,2008, and the statement of affairs reflects the following amounts: Book Value
Estimated Current Value
Assets: Assets pledged with fully secured creditors P300,000 Assets pledged with partially secured Creditors ……………………........ 180,000 Free assets………………………………... 420,000 P 900,000
P370,000 120,000 320,000 P 810,000
Liabilities: Liabilities with priority…………………. Fully secured creditors…………………. Partially secured creditors ……………… Unsecured creditors……………………..
P 70,000 260,000 200,000 540,000 P 1,070,000
Assume that the assets are converted to cash at the estimated current values and the business is liquidated. What amount of cash will be available to pay unsecured nonpriority claims? a. P240,000 c. P320,000 b. 280,000 d. 360,000 10. Zamora and Co., Inc. purchased a Cadillac automobile with a little cash down and signed a note, secured by the Caddillac, for 48 easy monthly payments. When the company files for bankruptcy, the balance due on the Cadillac amount to P6,000,000. The car has a book value of P8,000,000 and a net realizable value of P4,000,000. The unsecured creditors of Zamora and Co. can expect to receive 50 percent of their claims. In the liquidation, the bank that holds the note on the Cadillac should receive: a. P240,000 c. P320,000 b. 280,000 d. 360,000 11. The following data are provided by the Troubled Company: Assets at book Value………………………………. P150,000 Assets at net realizable value………………………. 105,000 Liabilities at book value: Fully secured mortgage…………………….. 60,000 Unsecured accounts and notes payable ……. 70,000 Unrecorded liabilities: Interest on bank notes………………………. 50,000 Estimated cost of administering estate……... 6,000,000 The court has appointed a trustee to liquidate the company. The journal entry made by the trustee to record the assets and liabilities should include an estate deficit of: a. P31,500 c. P25,500 b. 31,000 d. 25,000 12. Using the same information in no. 11. the statement of affairs prepared by the trustee at this time should include an estimated deficiency to unsecured creditors of: a. P45,000 c. P31,500 b. 39,000 d. 25,000
13. Nah Lugi Co., is in bankruptcy and is being liquidated by a court-appointed trustee. The financial report that follow was prepared by the trustee just before the final cash distribution: Assets: Cash ……………………………..
P 100,000
Approved claims: Mortgage payable (secured by property That was sold for P 50,000)………….. Accounts payable, unsecured …………………. Administrative expenses payable, Unsecured……………………………… Salaries payable, unsecured…………………….
P 80,000 50,000 8,000 2,000 P 140,000
The administrative expenses are for trustees and other costs of administering the debtor corporation’s estate. How should the P100,000 be distributed to the following creditors?
a. b. c. d.
Unsecured Creditors with Priority P0 10,000 5,000 10,000
Partially Secured Creditors P 80,000 80,000 65,000 65,000
Unsecured Creditors without Priority P20,000 10,000 25,000 25,000
14. On December 18, 2008, the statement of affairs of Downside Company, which is in bankruptcy liquidation, included the following: Assets pledged for fully secured liabilities……………. Assets pledged for partially secured liabilities………… Free Assets ……………………………………………. Fully Secured liabilities ………………………………. Partially secured liabilities ……………………………. Unsecured liabilities with priority ……………………. Unsecured liabilities without priority ………………… Compute the estimated amount to be paid to:
P100,000 40,000 120,000 80,000 50,000 60,000 90,000
Fully Secured Liabilities a. P80,000 b. 64,000 c. 80,000 d. 80,000
Unsecured Liabilities w/ Priority P60,000 60,000 48,000 60,000
Partially Secured Liabilities P50,000 48,000 60,000 48,000
Unsecured Liabilities w/o Priority P70,000 88,000 72,000 72,000
15. Amounts related to the statement of affairs of Windup Company, in a bankruptcy liquidation as April 1, 2008, were as follows: Assets pledged for fully secured liabilities ……………… P80,000 Assets pledged for partially secured liabilities…………… 50,000 Free Assets……………………………………………….. 272,000 Fully secured liabilities ………………………………….. 60,000 Partially secured liabilities ………………………………. 80,000 Unsecured liabilities with priority ………………………. 40,000 Unsecured liabilities w/o priority ……………………….. 330,000 Compute the: (1) total estimated deficiency to unsecured creditors, and (2) the costs per peso that unsecured creditors may expect to receive from Windup Company. a. (1) P 78,000; (2) P.76 c. (1) P108,000;(2) P.81 b. (1) P108,000; (2) P.70 d. (1) P158,000; (2) P.61 16. The following data were taken from the statement of affairs for Liquo Company: Assets pledged for fully secured liabilities (fair value, P75,000) ……………………………… P 90,000 Assets pledged to partially secured liabilities (fair value, P52,000)………………………………. 74,000 Free assets (fair value, P40,000)…………………………... 70,000 Unsecured liabilities w/ priority …………………………... 7,000 Fully secured liabilities …………………………………… 30,000 Partially secured liabilities ………………………………... 60,000 Unsecured liabilities w/o priority …………………………. 112,000 Compute the; (1) total estimated deficiency to unsecured creditors, and (2) the expected recovery per peso of unsecured per peso of unsecured claims. a. (1) 42,000; (2) P.65 c. (1) P 0; (2) P 1.00 b. (1) 3,000; (2) P .98 d. (1) P42,000; (2) P .70
17. Katherine, a CPA, has prepared a statement of affairs. Assets which there are no claims or liens are expected to produce P70,000, which must be allocated to
unsecured claims of all classes totaling P105,000. The following are some of the claims outstanding: 1. Accounting fees for Katherine, P1,500. 2. An unrecorded note for P1,000, on which P60 of interest has accrued, held by Angie. 3. A note for P3,000 secured by P4,000 receivables, estimated to be 605 collectible held by Joy. 4. A P1,500 note, on which P30 of interest has accrued, held by Joyots. Property with a book value of P1,000 and a market value of P1,800 is pledged to guarantee payment of principal and interest. 5. Unpaid income taxes of P3,500. Compute the estimated payment to partially secured creditors: a. P1,060 c. P2,490 b. P1,950 d. P2,790
18. The creditors if the Rogerod Corporation agreed to liquidation based on the statement of affairs, suggested that unsecured creditors, without priority would receive approximately P.60 on the peso. The unsecured creditors are interested in determining whether the preliminary estimate still seems appropriate. The trustee was originally assigned noncash assets of P1,480,000 and creditors claims as follows: fully secured,P670,000; partially secured, P400,000; unsecured with priority, P200,000, and unsecured without priority, P320,000. Assets with a total book value of P45,000 and unsecured liabilities (without priority) of P35,000 were subsequently discovered. Assets with a total book value of P740,000 were sold for P715,000 net. Fully secured liabilities of P280,000 were p aid. Remaining liquidation expenses were estimated to be P30,000. Assume the remaining noncash assets have an estimated net realizable value as follows: Assets traceable to fully secured creditors ………………. P240,000 Assets traceable to partially secured creditors …………... 110,000 Remaining Assets ………………………………………... 382,000 Determining the revised estimate of the dividend to be receive by unsecured creditors without priority: a. 100.00% b. 66.17% c. 45.97% d. Cannot be determined 19. Palubog Co. is insolvent and its statement of affairs shows the following information:
Estimate gains on realization of assets …………………. Estimated losses on realization of assets ……………….. Additional assets ……………………………………….. Additional liabilities ……………………………………. Capital Stock …………………………………………… Deficit …………………………………………………..
P1,440,000 2,000,000 1,280,000 960,000 2,000,000 1,200,000
The deficiency pro-rate on the peso to stockholders is : a. P.30 b. P.43 c. P.57 d. P.70 20. Zero Na Corp. has been undergoing liquidation since January 1. As of March 31, its condensed statement of realization is presented below: Assets: Assets to be realized ………………………. Assets acquired …………………………….. Assets realized ……………………………... Assets not realized ………………………….
P1,375,000 750,000 1,200,000 1,375,000
Liabilities: Liabilities liquidated ……………………….. Liabilities not liquidated ……………………. Liabilities to be liquidated ………………….. Liabilities assumed ………………………….
P1,875,000 1,700,000 2,250,000 1,625,000
Revenues and Expenses: Supplementary charges …………………….. Supplementary credits ………………………
P3,125,000 2,800,000
The net gain (loss) for three months period ending March 31 is: a. P250,000 b. (325,000) c. P425,000 d. P750,000
Items 21 through 33 are based on the following data: The Palubog Company has decided to seek liquidation after previous restructuring and quasi-reorganization attempts failed. The company has the following condensed balance sheet as May 1, 2008:
Assets Cash ……… …………... P120,000 Receivables (net)………. P280,000 Inventory ……………… 70,000 Prepaid expenses ……… 1,000 Plant assets ……………. 300,000 Goodwill ……………… 39,000
Total…………… P702,000
Liabilities and Stockholder’s Equity Accrued payroll …………….P40,000 Loans from officer …………. 50,000 Accounts payable …………… 60,000 Equipment loan payable ……. 360,000 Business loan payable ………. 180,000 Common Stock ……………….60,000 Deficit ………………………. (48,000) Total …………… P702,000
The equipment loan payable is secured by specific plat assets having a book value of P300,000 and a realizable value of P350,000. Of the accounts payable, P40,000 is secured by inventory which has cost of P40,000 and a liquidation value of P44,000. The balance of the inventory has a realizable value of P32,000. Receivables with a book value and market value of P100,000 and P80,000 respectively have been pledge as collateral on the business loan payable. The balance of the receivables have a realizable value of P150,000. 21. Assuming trustee expenses of P12,000 in addition to recorded liabilities, which of the remaining unsecured creditors has the next highest order of priority. a. Accrued payroll b. Equipment loan payable c. Loan from officer d. Business loan payable 22. The realizable value of assets pledge with fully secured creditors is: a. P459,000 b. 44,000 c. 40,000 d. 489,000 23. Of those creditors who are partially secured, their unsecured amounts are: a. P430,000 b. 110,000 c. 540,000 d. 120,000 24. The total realizable value of free assets to unsecured creditors before unsecured creditors with priority is: a. P628,000 b. 232,000 c. 220,000 d. 198,000 25. The dividend to unsecured creditors or the expected recovery percentage of unsecured creditors (rounded) is :
a. b. c. d.
90% 100% 88% 76%
26. Estimated deficiency to unsecured creditors is : a. P -0b. 22,000 c. 2,000 d. 12,000 27. Estimated loss as asset disposition is : a. P51,000 b. 89,000 c. 51,000 d. 90,000 28. Estimated gain as asset disposition is: a. P56,000 b. 54,000 c. 52,000 d. 6,000 29. Estimated amount paid to unsecured creditors with priority is : a. P10,000 b. 30,000 c. 40,000 d. 110,000 30. Estimated amount paid to fully secured creditors is: a. P40,000 b. 390,000 c. 470,000 d. 430,000 31. Estimated amount paid to unsecured creditors without priority is : a. P70,000 b. 61,600 c. 20,000 d. 50,000 32. Estimated payment to partially secured creditors is : a. P358,800 b. 516,800 c. 168,000 d. 430,000
33. Estimated payment to creditors is (discrepancy is expected due to rounding off). a. P580,000 b. 659,600 c. 571,000 d. 668,400
