Question

A company entering liquidation has reported assets with a book value of $200,000 and a liquidation...

A company entering liquidation has reported assets with a book value of $200,000 and a liquidation value of $120,000, and previously unreported software that it estimates it can sell for $25,000. It has reported liabilities with a book value of $180,000, and believes it is probable that it can negotiate the payments down by 25%. The company's net assets, reported on its statement of net assets in liquidation, are

A $(35,000)

B $20,000

C $(15,000)

D $(60,000)

Inho Corporation has fully secured liabilities of $300,000 and unsecured liabilities of $1,500,000, of which $250,000 have legal priority. Inho's assets are expected to realize $1,000,000; of these, $420,000 is pledged to the fully-secured creditors.

Inho's net free assets amount to

A $1,000,000.

B $ 700,000.

C $ 580,000.

D $ 450,000.

The estimated deficiency to Inho's unsecured creditors is

A $800,000.

B$700,000.

C$500,000.

D $450,000.

Borden Corporation is undergoing a Chapter 7 liquidation. Currently, it has cash of $130,000, inventory of $650,000, and equipment of $775,000. It owes an unsecured bank loan payable of $500,000 and unsecured accounts payable of $1,600,000. During the current month, the Receiver sells Borden's entire inventory to a liquidator for $290,000. The entire cash balance is then distributed to unsecured creditors.

Borden's statement of realization and liquidation shows

A gain on liquidation of $1,680,000.

B assets not realized of $360,000 for inventory and $775,000 for equipment.

C assets to be realized of $1,555,000 (cash, inventory, and equipment).

D loss on realization of $360,000.

Business   Accounting   
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Homework Answers

Answer #1
a) Option C $(15,000) is the correct answer
Liquidation Value Of Asset 120000
Less: Adjusted Liabilities 135000
Net Asset -15000
b) Option D $ 450,000 is the correct answer
Inho's Realisable Assets 1000000
Less: Secured Liabilites 300000
          Legal Priorities Liabilities 250000
Free Assets 450000
c) Option A $ 800,000 is the correct answer
Unsecured Liabilties 1500000
Less: Legal Priorities Liabilities 250000
          Free Assets 450000
Inho's unsecured creditors deficiency 800000
d) Option D loss on realization of $360,000 is the correct answer.
Inventory 650000
Selling Price 290000
Loss on sale 360000
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