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  • CORPORATE LIQUIDATION D Corporation

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    Reginald Valencia
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    The D Corporation is undergoing liquidation and has various assets and liabilities. Key assets include $396,000 in cash, $924,000 in receivables, and $900,000 in equipment. Major liabilities consist of a $1,200,000 bank loan secured by equipment, a $594,000 note payable secured by receivables, and $300,000 in accounts payable of which $140,000 is secured by inventory. Additional expenses include interest, taxes, and trustee fees totaling $94,000 with priority.

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    ACC 3RD YEAR

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    The D Corporation is undergoing liquidation and has various assets and liabilities. Key assets include $396,000 in cash, $924,000 in receivables, and $900,000 in equipment. Major liabilities consist of a $1,200,000 bank loan secured by equipment, a $594,000 note payable secured by receivables, and $300,000 in accounts payable of which $140,000 is secured by inventory. Additional expenses include interest, taxes, and trustee fees totaling $94,000 with priority.

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    © All Rights Reserved
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    30 views2 pages

    CORPORATE LIQUIDATION D Corporation

    Uploaded by

    Reginald Valencia
    The D Corporation is undergoing liquidation and has various assets and liabilities. Key assets include $396,000 in cash, $924,000 in receivables, and $900,000 in equipment. Major liabilities consist of a $1,200,000 bank loan secured by equipment, a $594,000 note payable secured by receivables, and $300,000 in accounts payable of which $140,000 is secured by inventory. Additional expenses include interest, taxes, and trustee fees totaling $94,000 with priority.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    CORPORATE LIQUIDATION

    I
    The D Corporation, which is undergoing liquidation, has the following
    condensed balance sheet as of July 1, 2008:

    Assets Liabilities and Shareholders’ Equity


    Cash P 396,000 Salaries Payable
    P120,000
    Receivables(net) 924,000 Accounts Payable
    300,000
    Inventory 231,000 Bonds Payable
    270,000
    Prepaid Expenses 3,000 Bank Loan Payable 1,200,000
    Equipment (net) 900,000 Note Payable 594,000
    Goodwill 120,000 Ordinary shares
    240,000
    Deficit

    (150,000)

    Total P2,574,000 Total P2,574,000


    The bank loan payable is secured by the equipment having a book
    value of P900,000 and a
    realizable value of P1,050,000. Of the accounts payable,
    P140,000 is secured by inventory
    which has a cost of P120,000 and a liquidation value of P132,000.
    The balance of the inventory
    has a realizable value of P70,000. Receivables with a book
    value and realizable value of
    P624,000 and P600,000 respectively have been pledged as
    collateral on the note payable. The
    balance of the receivable is estimated to be 60% collectible. In
    addition to the recorded liabilities
    are accrued interest on bank loan payable amounting to P30,000,
    accrued interest on the bonds
    payable amounting to P18,000, trustee’s fee amounting P25,000
    and taxes payable amounting
    to P21,000.
    Prepare a Statement of Affairs in July
    Solution:
    BV NRV Classification
    Cash 396,000 396,000 Unpledged assets
    Receivables (net) 924,000 600,000 Assets pledge to Fully Secured Creditors
    Receivables (net) 180,000 Unpledged assets
    Inventory 231,000 132,000 Assets pledge to Partially Secured Creditors
    Inventory 70,000 Unpledged assets
    Prepaid Expenses 3,000 - Unpledged assets
    Property and Equipme 900,000 1,050,000 Assets pledge to Partially Secured Creditors
    Goodwill 120,000 - Unpledged assets
    Salaries Payable 120,000 120,000 Priority Creditors
    Accounts Payable 300,000 140,000 Partially Secured Creditors
    Accounts Payable 160,000 Unsecured Creditors
    Bonds Payable 270,000 270,000 Unsecured Creditors
    Interest Payable 18,000 Unsecured Creditors
    Bank Loan Payable 1,200,000 1,200,000 Partially Secured Creditors
    Interest Payable 30,000 Partially Secured Creditors
    Note Payable 594,000 594,000 Fully Secured Creditors
    Ordinary shares 240,000
    Deficit (150,000) (150,000) Squeeze
    Taxes Payable 21,000 Priority Creditors
    Trustees Expenses 25,000 Priority Creditors
    Total - -

    Assets Free Portion < Liabilities Unsecured


    Priority Deficiency
    APFSC-FSC 6,000 < PSC-APPSC 188,000
    Unpledged Assets 646,000 < Unsecured Creditors 448,000
    < Priority Creditors
    166,000
    Total Free Assets 652,000 < 636,000
    166,000 (150,000)
    S
    queeze
    Recovery Rate = Available Assets / Unsecured Creditors
    Recovery Rate = (652-166) / 636
    Recovery Rate = 0.76

    Fully Secured Creditors = 100% of amount owed FSC 594,0


    Priority Creditors = 100% of amount owed to Priority Creditors 166,0
    Partially Secured Creditors = 100% of APPSC + ((PSC-APPSC) x Rec. Rate) 1,325,6
    Unsecured Creditors = 100% of amount owed to Unsecured Creditors x Rec. Rate

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