Scribd
Upload
17 views2 pages

problems _ CORPORATE LIQUIDATION part 1

Uploaded by

verronabellagarcipleimiti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
17 views2 pages

problems _ CORPORATE LIQUIDATION part 1

Uploaded by

verronabellagarcipleimiti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

INSOLVENCY - a condition in which a company is unable to meet debts as the debts mature

FREE ASSETS are assets available to be distributed for liabilities with priority and other unsecured
obligations.
The accounting statement of affairs is prepared at the beginning of the liquidation process.

Debts can be restructured in the following ways:


I. Assets can be transferred to the creditor
II. An equity interest can be granted to the creditor
III. The terms of the debt can be modified

PROBLEMS:
1.
Christopher Corporation filed a bankruptcy petition in January. On March 1, the trustee provided the
following information about the corporation’s financial affairs:
Realizable
Assets Book value
Value

Cash ₱40,000 ₱40,000

Accounts receivable, net 200,000 150,000

Inventories 300,000 140,000

Plant assets-net 500,000 560,000

Total Assets ₱1,040,000

Liabilities

Liabilities for priority claims ₱160,000

Accounts payable-unsecured 300,000

Notes payable, secured by accounts receivable 200,000

Mortgage payable, secured by all plant assets 440,000

Total Liabilities ₱1,100,000

The estimated payment to creditor is ________________.


The expected recovery percentage of unsecured creditors ________________.
The amount expected to be available for unsecured claims without priority is __________________.
2. Monica Corporation has been undergoing liquidation since January 1. As of June 30, its condensed
statement of realization and liquidation is presented below:

Assets:

Assets to be realized ₱1,375,000

Assets acquired 750,000

Assets realized 1,200,000

Assets not realized 1,375,000

Liabilities:

Liabilities liquidated ₱1,875,000

Liabilities not liquidated 1,700,000

Liabilities to be liquidated 2,250,000

Liabilities assumed 1,625,000

Revenues and expenses:

Supplementary charges ₱3,125,000

Supplementary credits 2,800,000


The net gain (loss) for the six-month period ending June 30 is: _____________.

3. Ezra Company has filed for liquidation. The following data is available:
Free assets at net realizable value ₱100,000

Liabilities per books (unsecured) 160,000

Unrecorded liabilities:

Liquidation expenses 6,000

Unpaid wages with priority claim 10,000

What percentage of their claims should the unsecured creditors receive in the liquidation?

You might also like