Question

Wright Company recently petitioned for bankruptcy and is now in the process of preparing a statement...

Wright Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The carrying values and estimated fair values of the assets of Wright Company are as follows:

                                                Carrying Value            Fair Value

Cash                                        $10,000                     $10,000

Accounts Receivable                  60,000                         20,000

Inventory                                    70,000                         40,000

Land                                            90,000                         75,000

Building (net)                         200,000                       150,000

Equipment (net)                          80,000                       25,000

Total                                        $510,000                     $320,000
  
Debts of Wright are as follows:

Accounts Payable                                                                   $40,000

Wages Payable (all have priority)                                                6,000

Taxes Payable                                                                             12,000

Notes Payable (secured by receivables and inventory)           90,000

Interest on Notes Payable                                                             5,000

Bonds Payable (secured by land and buildings)                         200,000        

Interest on Bonds Payable                                                            8,000

Total                                                                                        $361,000
   

1. Based on the preceding information, what is the total amount of unsecured claims?
A. $52,000
B. $71,000
C. $75,000
D. $95,000

2. Based on the preceding information, what estimated amount will be available for general unsecured creditors upon liquidation?
A. $34,000
B. $52,000
C. $56,000
D. $75,000

3. Based on the preceding information, what is the estimated dividend percentage?
A. 45 percent
B. 55 percent
C. 61 percent
D. 69 percent

Business   Accounting   
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Homework Answers

Answer #1

1. B. $71,00

I.e. 40,000+6,000+12,000+5,000+8,000

2. B. $52,000

i.e. (150,000+75,000-200,000-8,000) + 10,000 + 25,00

Note that fair value of accounts receivable & inventory is not added as their value is less than Notes Payable which are secured against it. So there will be no extra payment left out of them to pay unsecured.

3. Aditional information needed

Equity = 510,000 - 361,000

= $149,000

Dividend, question incomplete.

Also the total of fair value mentioned is wrong. Kindly check if there is additional information.

Hope this makes contribution to your success. Hit Like to motivates the experts to provide quality solutions.

Any feedback will also be appreciated.

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