DAYAG advac SolutionChapter6.docx

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Chapter 6

Problem I

1. Statement of Affairs - Formal

MINER COMPANY Statement of Affairs May 31, 2012 Book Value Assets Realizable Value Assets Pledged with Fully Secured Creditors:

P 50,000 Notes Receivable P39,800

1,200 Accrued Interest Rec. 1,000 P 40,800

Notes Payable 40,000

Accrued Interest Pay. 800 40,800

119,000 Building 75,000

Note Payable 20,000

Accrued Interest Pay. 800 20,800 P 54,200 Assets Pledged with Partially Secured Creditors:

13,200 Equipment 4,200 Note Payable 10,000 Free Assets 6,000 Cash 6,000 61,000 Accounts Receivable 50,000 60,000 Inventory 30,000 1,100 Prepaid Insurance 400 8,500 Goodwill 0

Total Net Realizable Value 140,600

Liabilities having Priority – Wages 6,000

Taxes 2,400 8,400

Net Free Assets 132,200

Estimated Deficiency to Unsecured Creditors 53,600

P 320,000 P 185,800

Book

Value Equities Unsecured

Liabilities Having Priority:

P 6,000 Accrued Wages P 6,000

2,400 Taxes Payable 2,400 P 8,400

Fully Secured Creditors:

60,000 Notes Payable 60,000

1,600 Accrued Interest Payable 1,600 61,600 Partially Secured Creditors:

10,000 Note Payable 10,000

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Unsecured Creditors: 170,000 Accounts Payable 170,000 10,000 Notes Payable 10,000 Stockholders’ Equity 110,000 Common Stock

( 50,000) Retained Earnings (Deficit)

P 320,000 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

Down Dog Corporation Statement of Affairs

June 30, 2014

Deficiency Account

Book Value Assets Realizable Value (Loss/Gain)

Pledged with partially secured creditors

P165,000 Equipment-net P87,000 (78,000) Less: Note payable and accrued interest (96,000) P 0

Unsecured amount (See below) (9,000)

Free Assets

3,000 Cash 3,000

72,000 Accounts receivable-net 48,000 (24,000)

60,000 Inventories 72,000 12,000

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 ______

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Unsecured

Book Value Equities Liabilities

Priority liabilities

P 45,000 Wages payable (assumed under

P4,650 per employee) P 45,000

Partially secured creditors

96,000 Note payable and accrued interest P 96,000

Less: Equipment pledged as security (87,000) P 9,000

Unsecured creditors

72,000 Accounts payable 72,000

27,000 Rent payable 27,000

Stockholders’ equity

180,000 Capital stock 180,000

(120,000) Retained earnings (deficit) ______ (120,000)

P300,000 P108,000 P 60,000

Estimated Deficiency P(30,000)

2. Estimated payments per dollar for unsecured creditors

Cash available P210,000

Distribution to partially secured and unsecured priority creditors:

Note payable and interest P87,000

Administrative expenses 24,000

Wages payable 45,000 (156,000)

Available to unsecured nonpriority creditors P 54,000

Note payable and interest (unsecured portion) P 9,000

Accounts payable 72,000

Rent payable 27,000

Unsecured nonpriority claims 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 P87,000 Unsecured portion (P9,000 × 0.50) 4,500 P91,500 Unsecured priority Administrative expenses P24,000 Wages payable 45,000 69,000 Unsecured nonpriority Accounts payable (P72,000 × 0.50 P36,000 Rent payable (P27,000 × 0.50) 13,500 49,500 Total payments P210,000 Problem III

(4)

Allocated to:

Fully secured creditors (316,000)

Partially secured creditors (300,000)

Unsecured creditors with priority (100,000)

Remainder available to general unsecured creditors P559,000 Payment rate to general unsecured creditors

(Including balance due to partially secured creditors)

P559,000 / (P1,165,000 + (P400,000 - P300,000)) 44.2% Realizable value of assets:

Assets pledged to fully secured creditors P635,000 Assets pledged to partially secured creditors 300,000

Free assets 340,000

Total realizable value 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 ... P 35,000 Buildings and Equipment ... 110,000 Total ... P145,000 Liabilities with Priority:

Administrative Expenses ... P 20,000 Salaries Payable (only P3,000 per employee) ... 6,000 Income Taxes ... 8,000 Total ... 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) ... P 30,000 Accounts Payable ... 85,000 Bonds Payable ... 70,000 Total ... P185,000 Percentage of Unsecured Liabilities To Be Paid: P111,000/P185,000 = 60 % Payment On Notes Payable:

Value of Security (land) ... P 90,000 60% of Remaining P30,000 ... 18,000 Total Collected by holders ... P108,000

(5)

Problem V Free Assets:

Cash ... P30,000 Receivables (30 percent collectible) ... 15,000 Inventory ... 39,000 Land (value in excess of secured note:

P120,000 – P110,000) ... 10,000 Total ... P94,000 Less: Liabilities with priority

Salary payable (below maximum) ... (10,000) Free assets available ... P84,000 Unsecured Liabilities:

Accounts payable ... P90,000 Bonds payable (less secured interest in

building: P300,000 – P180,000) ... 120,000 Unsecured liabilities ... 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) ... P10,000 Accounts payable (unsecured—will collect 40%

of debts of P90,000) ... P36,000 Note payable (fully secured by land—will collect

entire balance) ... P110,000 Bonds payable (partially secured—will collect

P180,000 from building and 40 percent of the

remaining P120,000) ... P228,000 Problem VI Class of Creditors Total Creditor’s Claims Total Amounts Expected to be Recovered % of Total Claims Expected to be Recovered Fully secured liabilities

Partially secured liabilities Unsecured liabilities with priority Unsecured liabilities without priority

183,600 54,600 30,810 182,500 183,600 51,720 30,810 116,800 100.0 94.7 100.0 64.0 Problem VII

1. 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

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Less distributions to unsecured claims with priority:

Wages payable P 10,000

Taxes payable 20,000 30,000

Amount available for unsecured claims P410,000 2. Unsecured portion of notes payable and

interest (P500,000 + P30,000 – P150,000) P380,000

Accounts payable 260,000

Total claims ofunsecured creditors P640,000

Dividend to Unsecured Creditors P410,000 ÷ P640,000 = 64.1%

3. Unsecured portion of notes payable and

Interest P380,000

Dividend on unsecured amount 64.1%

Amount received on unsecured portion P243,580

Proceeds from receivables and inventory 150,000

Total Received P393,580

Dividend to note holders: P393,580 ÷ P530,000 = 74.3% Problem VIII 1. WILBUR CORPORATION STATEMENT OF AFFAIRS DECEMBER 31, 20x4 Assets Book Value Estimated Current Values Estimated Amount Available to Unsecured Claims Estimated Gain (Loss) on Realization (1) Assets pledged with fully secured

creditors:

P 40,000 Accounts receivable (net) P 40,000 Less: 10% note payable and

interest

38,500 P 1,500

50,000 Land P 65,000 P 15,000

110,000 Plant and equipment (net) 100,000 (10,000)

P165,000

Less: Mortgages payable and

interest (157,500) 7,500

(2) Assets pledged with partially secured creditors:

20,000 Marketable securities P 16,000 (4,000)

Less: 10% note payable and

interest (20,800)

35,000 Inventory P 32,000 (3,000)

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(3) Free assets:

4,000 Cash P 4,000 4,000

35,000 Accounts receivable (net) 35,000 35,000

55,000 Inventory 50,000 50,000 (5,000)

6,000 Prepaid insurance 1,000 1,000 (5,000)

140,000 Plant and equipment (net) 60,000 60,000 (80,000)

48,000 Franchises 15,000 15,000 (33,000)

Estimated amount available P 174,000

Less: Creditors with priority (43,000)

Net available to unsecured creditors P 131,000

Estimated deficiency 45,000

P 543,000 (P 125,000)

Total unsecured debt P 176,000

2. Percentage to unsecured creditors: P131,000/P176,000 = 74.43% Problem IX

Smith Company

Statement of Realization and Liquidation Assets

Assets to be realized Assets Realized

Old Receivebles, net P 50,000 Old Receivbles P 28,000 Marketable Securities 20,000 New Receivbles 65,000 Old Inventory 72,000 Marketable Securities 15,000 Depreciable Assets, net 120,000 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 Items

Supplementary Charges Supplementary Credits

Old Current Payables P 31,000 Net Loss P 7,000 Liabilities

Liabilities Liquidated Liabilities to be Liquidated

Old Current Payables P 31,000 Old Current Payables P 65,000 Liabilities Not Liquidated Liabilities Incurred

Old Current Payables P 34,000 ________ P433,000 P 433,000

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Problem X

Mallory Corporation

Statement of Realization and Liquidation For the Three Months Ended July 31, 20x5

Assets

Assets Cash Non-Cash

Beginning balances assigned 5/1/x5 P 4,000 P720,000

Cash Receipts:

Collection of Accounts Receivable 60,000 (70,000)

Sale of inventory 170,000 (200,000)

Sale of land and building 20,000 (340,000)

Sale of machinery 70,000 (100,000)

Cash Disbursements:

Payment of salaries payable (60,000)

Partial payment of accounts pay. (170,000)

Partial payment of bank loan (70,000)

Ending balance P24,000 P10,000

Liabilities Unsecured

Fully Partially With Without Owner's Assets Secured Secured Priority Priority Equity Beginning balances assigned

5/1/X5 P240,000 P270,000 P94,000 P 0 P120,000 Cash Receipts:

Collection of Accounts

Receivable (10,000)

Sale of inventory (30,000)

Sale of land and building (240,000) (80,000)

Sale of machinery (30,000)

Cash Disbursements:

Payment of salaries payable (60,000) Partial payment of accounts

pay (180,000) 10,000

Partial payment of bank loan ________ (90,000) ________ 20,000 ________ Ending balance P 0

P P 0 0 P34,000 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

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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…………. P 1,375,000 Assets Realized………..P 1,200,000 Assets Acquired……….. 750,000 Assets Not Realized……… 1,375,000 Liabilities Liquidated…………. 1,875,000 Liabilities to be Liquidated…. 2,250,000 Liabilities Not Liquidated……. 1,700,000 Liabilities Assumed………….. 1,625,000 Supplementary charges/ Supplementary credits……… 2,800,000 debits……… 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 P440,000

Or,

Total estimated proceeds P910,000

Less asset proceeds claimed by secured creditors:

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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/total free P440,000 19. P410,000

Total available to unsecured claimants/total free P440,000 Less distributions to unsecured claims

with priority:

Wages payable P 10,000

Taxes payable 20,000 30,000

Amount available for unsecured

claims/net free assets 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 P380,000

Dividend on unsecured amount x 64.1%

Amount received on unsecured portion P243,580 Proceeds from receivables and inventory 150,000

Total Received 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) 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

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Book

Value Assets

Assets pledged with fully secured creditors:

98,500 Land and Bldg 92,800 22,200 (5,700) 5,800 Investment in Calandir 15,000 4,625 9,200

Total 107,800 Assets pledged with partially

secured creditors: 41,000 Inventory 20,000 (21,000) 43,000 Equipment 8,000 (35,000) Free Assets: 1,850 Cash 1,850 1,850 0 21,200 Accounts Rec 17,000 17,000 (4,200) 15,000 Note Rec 15,000 15,000 0

Estimated Amount Avail for unsecured creditors

with and without priority 60,675

Less unsecured creditors with priority (3,775) Estimated amounts for unsecured creditors

without priority (Net Free Assets):

Net Realizable Amount Avail 56,900

_______ Deficiency _______ 15,725 _______

226,350 169,650 72,625 (56,700)

Estimated Estimated Unsecured Amount

Book Liabilities Secured With Without

Value and Owners Equity Amount Priority Priority Fully Secured Creditors:

600 Accrued Mtg Interest 600 70,000 Mortgage Payable 70,000 375 Accrued N/P Interest 375 10,000 Note Payable 10,000 Total 80,975 Partially Secured Creditors: 50,000 Accounts Payable 28,000 22,000

Unsecured Creditors with Priority:

3,775 Accrued Payroll 3,775

Unsecured creditors without Priority:

40,625 Accounts Payable 40,625

10,000 Other Accrued Liabilities _______ 10,000

185,375 Totals 108,975 3,775 72,625

40,975 Owner Equity 226,350

31. P56,900 – refer to No. 30 for computation 32. P72,625 – refer to No. for computation

33. Dividend - P56,900/P72,625 = P.78 – refer to No. 30 for further computation 34. P80,975 – refer to No. 30 for computation

35. P45,160 = P28,000 + (P22,000 x 78%) 36. P3,775

37. P39,487.50 = 78% x (P40,625 + P10,000) 38. P169,397.50

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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 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 Sale 16,000 (5,800) 10,200 N/R Collected 15,000 (15,000) 0 Equipment Sale 7,000 (43,000) (36,000) Inventory Sale 22,000 (41,000) (19,000) Cash Disbursements: Bank Loan (10,375) (10,375) Part Pyt-A/P (29,000) --- --- (50,000) --- 21,000 --- 6/30 Balance 22,475 119,700 70,600 0 3,775 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 Assets Estimated Net Realizable Value Estimated Amount Available for Unsecured Creditor Estimated Gain or (Loss) on Liquidation Assets pledged with fully secured creditors:

57,000 Accounts receivable (net) 45,000 12,600 (12,000) 174,000 Land, plant and equipment (net) 150,000 77,400 (24,000)

Total 195,000

Free assets:

6,000 Notes receivable 6,000 6,000 0

900 Accrued interest receivable 900 900 0 90,000 Inventories (90,000 x 60%) 54,000 54,000 (36,000)

Estimated amount available for unsecured creditors with and

without priority 150,900

Less unsecured creditors with priority (26,900) Estimated amounts for unsecured

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Net realizable amount available 124,000 Deficiency 26,000 327,900 Totals 255,900 150,000 (72,000) Estimated Secured Amount Estimated Unsecured Amount With Priority Without Priority Book

Value Liabilities and Owners' Equity 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

0

Administration fees – accountant’s

fee 2,000

Unsecured creditors without priority:

0 Accrued interest 0

18,000 Cash overdraft 18,000

6,000 Notes payable 6,000

126,000 Accounts payable --- --- 126,000 279,900 Totals 105,000 26,900 150,000 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) 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

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... 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 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) P .15 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%

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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 P 65,000

Excess of pledged with secured liabilities

(P117,000 – P104,000) 13,000 P 78,000 16. P52,000

Free assets after of liabilities with priority:

Total free assets P 78,000

Less: Liabilities with priority 26,000 P 52,000 17. P260,000

Unsecured creditors:

Excess of partially secured liabilities over

pledged assets (P195,000 – P169,000) P 26,000

Accounts payable 234,000

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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 P390,000

Excess from assets pledged with fully secured

(P260,000 – P195,000) 65,000

Amount available P455,000

Unsecured liabilities with priority ( 208,000) Net free assets / available for unsecured P247,000 20. P32,000

Cash 120,000

Mortgage payable, paid in full ( 60,000 )

60,000

Note payable to bank, secured portion ( 30,000 )

30,000 Priority claims (P16,000 of administrative costs + P2,000 of customer deposits + P4,000 property tax) ( 22,000 ) Available for unsecured nonpriority claims 8,000

Unsecured, nonpriority claims:

Unsecured portion of note payable to bank 10,000

Accounts payable 30,000

Total unsecured, nonpriority claims 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 35,000

Less: Portion secured by equipment ( 7,000 )

Unsecured portion 28,000

Estimated recovery on secured portion 7,000

Estimated recovery on unsecured portion

(P28,000 x P.30) = 8,400

Recovery on mortgage note receivable 15,400

22.

Mortgage note receivable 80,000

Less: Portion secured by marketable securities ( 60,000 )

Unsecured portion 20,000

Estimated recovery on secured portion 60,000

Estimated recovery on unsecured portion

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Recovery on mortgage note receivable 65,000

23. P30,000

Book value of assets P700,000

Net realizable of assets 370,000

P330,000 Less stockholders' equity

(P700,000 – P400,000) 300,000

Deficiency 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) P380,000

Accounts payable 260,000

Total claims of unsecured creditors P640,000

Dividend to unsecured creditors: P410,000 ÷ P640,000 = 64.1%

28. Unsecured portion of notes payable and

Interest P380,000

Dividend on unsecured amount x 64.1%

Amount received on unsecured portion P243,580 Proceeds from receivables and inventory 150,000

Total Received P393,580

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

(18)

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.

False

15.

True

20.

False

25. a

30. b

35. d

40. c

11.

False

16.

True

21. c

26. d

31. b

36. b

41. b

12.

True

17.

True

22. a

27.

c

32.

a

37.

c

42.

a

13.

False

18.

True

23. a

28. e

33. c

38. a

43. c

44.

a

49.

c

54.

d

59. a

45. c

50. d

55. c

60. c

46. c

51.

a

56.

d

47. a

52. d

57. b

48. b

53. b

58. a

Figure

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References

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