Corporation Liquidation
P1
The following information is available on June 1, 2018 to Samsung Company, which is having fifficulty in paying its
liabilities as they become due:
Carrying Amount
Cash
8,960
Accounts receivable, net, fair value equal to carrying amount
103,040
Inventories, current fair value, 40,320 pledged on 47,040of notes payable
87,360
Machinery and Equipment, net, current fair value of 150,976 pledged on mortgage on
note payable
239,680
Office Supplies, current fair value of 5,600
4,480
Wages payable
12,992
Taxes payable
2,688
Accounts payable
134,400
Notes payable, 47,040 of which is secured by inventories
89,600
Mortgage note payable
112,896
Common stock, 5 par
224,000
Retained earnings, deficit
133,056
Additional information:
1. Estimated liability to the trustee is 58,240.
2. A delivery van previously given to the supervisor was returned to the company, fair market value, 56,000.
Compute the estimated recoverable amounts to the different types of creditors in the event of liquidation.
P2
SMDC Corp. a closely held corporation was undergoing liquidation. The total cash value of SMDC’s bankruptcy estate
after the sale of all assets and payment of administrative expenses is 100,000.
SMDC has the following creditors:

BDO Bank is owed 75,000 on a mortgage loan secured by SMDC’s real property. The property was valued at
and sold, in bankruptcy, for 70,000.

The BIR has a 12,000 recorded judgement for unpaid corporate income tax.

National Office Supplies has an unsecured claim of 3,000 that was timely filed.

ACE Electric Company has an unsecured claim of 10,000 that was timely filed.

REH Publications has a claim of 16,000, which is secured by SMDC’s inventory that was valued and sold, in
bankruptcy, for 2,000. The claim was timely filed.
Required:
a. Calculate
b. Calculate
c. Calculate
d. Calculate
the
the
the
the
total
total
total
total
amount
amount
amount
amount
recoverable
recoverable
recoverable
recoverable
by
by
by
by
partially secured creditors.
unsecured creditors with priority.
fully secured creditors.
unsecured creditors without priority.
P3
A company that was to be liquidated had the following liabilities:
Income taxes
Note payable secured by land
Accounts payable
Salaries payable
Administrative expenses for liquidation
The company had the following assets:
Current assets
Land
Building
Required:
a. Total free assets:
b. Total liabilities with priority:
c. Net free assets:
d. Total unsecured liabilities:
10,000
100,000
251,050
12,950
20,000
Book value
100,000
50,000
150,000
Fair value
95,000
75,000
200,000
P4
The following data were taken from the statement of realization and liquidation of CRASHED CO.
Assets to be realized
1,375,000 Assets acquired
750,000
Supplementary credits
2,800,000 Assets realized
1,200,000
Liabilities to be liquidated
2,250,000 Liabilities assumed
1,625,000
Supplementary charges
3,125,000 Assets not realized
1,375,000
Liabilities liquidated
1,875,000 Liabilities not liquidated
1,700,000
The ending balances of capital stock and retained earnings are 1,500,000 and 238,000, respectively. A net loss of
738,000 was reported for the period.
What is the net gain/(loss) for the three-month period?
How much is the ending balance of cash?
P5
On December 31, 2019 the statement of affairs of BANKRUPTCY COMPANY, which is in bankruptcy liquidation,
included the following:
Assets pledged for fully secured liabilities
100,000
Assets pledged for partially secured liabilities
40,000
Free assets
120,000
Fully secured liabilities
80,000
Partially secured liabilities
50,000
Unsecured liabilities with priority
60,000
Unsecured liabilities without priority
90,000
Required:
a. Calculate
b. Calculate
c. Calculate
d. Calculate
the
the
the
the
total
total
total
total
amount
amount
amount
amount
recoverable
recoverable
recoverable
recoverable
by
by
by
by
partially secured creditors.
unsecured creditors with priority.
fully secured creditors.
unsecured creditors without priority.
P6
When SPENCER Company filed for liquidation with the Securities and Exchange Commission, it prepared the following
balance sheet.
Current assets, net realizable value, 50,000
80,000
Land and buildings, fair value, 240,000
200,000
Goodwill, fair value, 0
40,000
Total assets
320,000
Accounts payable
160,000
Mortgage payable, secured by land and building
200,000
Common stock
100,000
Retained earnings, deficit
(140,000)
Total liabilities and equities
320,0000
What is the estimated deficiency to unsecured creditors?
What percentage of their claims are the unsecured creditors likely to get?