Requirements:
1. How much is the estimated deficiency?
55,000
Cash 8,000
Inventories 20,000
Equipment 34,400
Total Free Assets 62,400
Less: UC with Priority 25,000
Net Free Assets P37,400
UC w/o Priority Inc. of UP of PSL 92,400
Deficiency (SHE) Debit balance 55,000
2. How much are the net free assets?
37,400
3. How much is the estimated payment to the mortgage payable?
137,264
Mortgage Payable 155,000
Interest Payable 15,000
170,000
NRV of Note Receivable 105,000
Interest Note Receivable 10,000
(115,000)
UP OF PSL (MP + IP) 55,000
UP of PSL (MP + IP) 55,000
NRV of NR and Interest on NR 115,000
ADD: RECOVERY FROM UP OF PSC(55K x 40.476) 22,261.8
137,264
UNSECURED CREDITS W/O PRIORITY
Unsecured AP (80,000 x 40%) x 20% = P6,400
Unsecured AE W/O Priority (30,000-2,000) =28,000
UP of PSL: (MP + IP) =55,000
UP of PSL (AP) =3,000
UC w/o Priority Inc. of UP of PSL 92,400
RECOVERY RATE OF UC W/O PRIORITY = 37,400/92,400 = 40.476%
4. How much is the estimated recovery percentage to the partially secured accounts payable?
96.28%
UC w/ PRIORITY FSL
LIQ. EXP 8,000 SECURED AP
SALARIES PAYABLE 15,000 (80,000 X 40%) X80% 25,600
ITP 2,000 FV OF EQUIPMENT 60,000
UC W/ PRIORITY 25,000 FREE EQUIP 34,400
PSL
SECURED AP (80,000 X 60%) 48,000
NRV OF INVENTORY 45,000
UP OF PSL (AP) (3,000)
NRV OF INVENTORY 45,000
(3,000 X 40.476%) 1214.28
46,214.28/48,000= 96.28%
ABC Co.'s statement of realization and liquidation shows the following:
ASSETS:
To be realized 2,000,000
Acquired 15,000
Realized 1,180,000
Not realized 220,000
LIABILITIES:
Liquidated 2,130,000
Not liquidated 1,190,000
To be liquidated 2,870,000
Assumed 32,000
SUPPLEMENTARY ITEMS:
Supplementary expenses 25,000
Supplementary income 18,000
Requirements:
1. How much is the net gain (loss) for the period?
Debits Credits
*Assets to be realized 2,000,000 *Assets realized 1,180,000
*Assets acquired 15,000 *Assets not realized 220,000
*Liabilities Liquidated 2,130,000 *Liabilities to be liquidated 2,870,000
*Liabilities not liquidated 1,190,000 *Liabilities assumed 32,000
*Supplementary expenses 25,000 *Supplementary income 18,000
TOTAL 5,360,000 4,320,000
Net Loss- excess of Dr. over Cr. 1,040,000
2. If the estate deficit at the end of the period is P870,000, how much is the ending balance of cash?
ASSETS = LIABILITIES + EQUITY
Cash
(squeeze) 100,000 Liabilities not liquidated 1,190,000 (start from here)
Assets not realized 220,000
Estate Deficit (870,000)
Total 320,000 Total 320,000
MULTIPLE CHOICE (PROBLEMS):
The next questions are based on the following information:
Quitter Co. is undergoing liquidation. Relevant information follows:
Carrying Realizable
amount value
Assets pledged with partially secured creditors 80,000 50,000
Free assets 220,000 160,000
Expected
settlement
amount Amount unsecured
Liabilities with priority 16,000
Partially secured creditors 75,000 25,000
Unsecured creditors 155,000 155,000
1. What is the total amount available for payment of claims of unsecured, creditors?
a. 210,000
b. 160,000
c. 144,000
d. 0
> Available for unsecured creditors
Free assets 160,000
Liabilities with priority
(16,000)
Net free assets 144,000
2. What is the estimated amount of liquidating dividend per peso claim?
a. 1.17
b. 1.03
c. 0.88
d. 0.80
Unsecured portion of partially secured creditors 25,000
Unsecured creditors
155,000
Total unsecured liabilities without priority 180,000
Net free assets 144,000
Divide by: Total unsecured liabilities without priority
180,000
Recovery per peso 0.80
3. What is the amount of deficiency to creditors?
a. 36,000
b. 144,000
c. 160,000
d. 180,000
Assets pledged with partially secured creditors
50,000
Free assets 160,000
Liabilities with priority
(16,000)
Partially secured creditors
(75,000)
Unsecured creditors
(155,000)
Deficiency
(36,000)
4. The following data were taken from the statement of affairs for Liquo Company:
Assets pledged for fully secured liabilities
(fair value, P75.000). P90,000
Assets pledged to partially secured liabilities
(fair value, P52,000) 74,000
Free assets (fair value, P40,000) 70,000
Unsecured liabilities with priority 7,000
Fully secured liabilities 30,000
Partially secured liabilities 60,000
Unsecured liabilities without priority 112,000
Compute the: (1) total estimated deficiency to unsecured creditors, and (2) the expected recovery per
peso of
unsecured claims.
a. (1) P42,000; (2) P.65 c. (1) P -0-; (2) P1.00
b. (1) P3,000; (2) P.98 d. (1) P42,000; (2) P.70
Bang Co . is undergoing liquidation. Relevant information follows:
Carrying amount
Accounts receivable 300,000
Inventories 110,000
Land 150,000
Building 400,000
The accounts receivable has a realizable value of P320,000. The accounts receivable has been pledged to
secure
notes payable with an expected settlement amount of P280.000.
The inventories have a total realizable value of P70,000. Included in the inventories are inventories with
carrying
amount of P50,000 and realizable value of P60,000 which have been pledged to secure an account
payable with an
estimated settlement amount of P40,000.
The land and building have a total realizable value of P450.000. Both assets have been used as collateral
security
for a bank loan of P250.000.
5. What is the estimated amount available for preferred claims and unsecured creditors out of assets
pledged with
fully secured creditors?
a. 200,000
b. 240,000
c. 270,000
d. 320,000
Assets pledged to fully Realizable Available for
secured creditors: value unsecured creditors
Accounts receivable 320,000
Notes payable
(280,000)
40,000
Land and building 450,000
Bank loan
(250,000)
200,000
Estimated amount out of assets pledged with fully secured creditors 240,000
6. What is the total amount of net free assets?
a. 200,000
b. 240,000
c. 270,000
d. 320,000
Assets pledged to fully Realizable Available for
secured creditors: value unsecured creditors
Accounts receivable 320,000
Notes payable
(280,000)
40,000
Land and building 450,000
Bank loan
(250,000)
200,000
Inventories 70,000
Inventories pledged to partially
secured creditors
(40,000) 30,000
Net free assets 270,000
7. The First Family Bank loaned P4,000,000 to Belle Corporation. The loan is secured by a land with a
book value
and fair market value of P5,000,000 and P3,000,000, respectively. What amount will the bank received if
unsecured
creditors received 25% of their claims?
a. P1,000,000
b. P3,000,000
c. P3,250,000
d. P4,000,000
Carrying amount
Accounts receivable 300,000
Inventories 110,000
Land 150,000
Building 400,000
The accounts receivable has a realizable value of P320,000. The accounts receivable has been pledged to
secure
notes payable with an expected settlement amount of P280.000.
The inventories have a total realizable value of P70,000. Included in the inventories are inventories with
carrying
amount of P50,000 and realizable value of P60,000 which have been pledged to secure an account
payable with an
estimated settlement amount of P40,000.
The land and building have a total realizable value of P450.000. Both assets have been used as collateral
security
for a bank loan of P250.000.
5. What is the estimated amount available for preferred claims and unsecured creditors out of assets
pledged with
fully secured creditors?
a. 200,000
b. 240,000
c. 270,000
d. 320,000
Assets pledged to fully Realizable Available for
secured creditors: value unsecured creditors
Accounts receivable 320,000
Notes payable
(280,000)
40,000
Land and building 450,000
Bank loan
(250,000)
200,000
Estimated amount out of assets pledged with fully secured creditors 240,000
6. What is the total amount of net free assets?
a. 200,000
b. 240,000
c. 270,000
d. 320,000
Assets pledged to fully Realizable Available for
secured creditors: value unsecured creditors
Accounts receivable 320,000
Notes payable
(280,000)
40,000
Land and building 450,000
Bank loan
(250,000)
200,000
Inventories 70,000
Inventories pledged to partially
secured creditors
(40,000) 30,000
Net free assets 270,000
7. The First Family Bank loaned P4,000,000 to Belle Corporation. The loan is secured by a land with a
book value
and fair market value of P5,000,000 and P3,000,000, respectively. What amount will the bank received if
unsecured
creditors received 25% of their claims?
a. P1,000,000
b. P3,000,000
c. P3,250,000
d. P4,000,000
Fully secured P 3,000,000
Unsecured claim (PI,000,000 x 25%)
250,000
Amount received by the bank P3,250,000
8. When the Insolvent Company filed for bankruptcy, it prepared the following balance sheet:
Current assets (net realizable value P500,000) P 800,000
Land and building (fair market value P2,400,000) 2,000,000
Goodwill
400,000
P3,200,000
Accounts payable (unsecured) P1,600,000
Mortgage payable (secured by land and building) 2,000,000
Common stock 1,000,000
Retained earnings (deficit) ( 1,400,000)
P3,200,000
What percentage of their claims will the unsecured creditors likely to get?
a. 43.75%
b. 50%
c. 56.25%
d. 100%
Current assets at realizable value 500,000
Land and building at fair value 2,400,000
Less: Mortgage payable Total realizable value
2,000,000
400,000
Divided by accounts payable 1,600,000
Percentage of claims of unsecured creditors 56.25%
9. Sayap Company signed a note payable to its bank for P2,000,000. Accrued interest on the note on
February 29,
2008 amounts to P50,000. The note is secured by inventory with a book value of P2,300,000. The
inventory is sold
for P1,600,000 and unsecured creditors receive 30% of their claims. What amount should the bank
receive in
settlement of the note and interest?
a. P2,050,000
b. P2,000,000
c. P1,705,000
d. P1,600,000
Proceeds for inventory 1,600,000
Unsecured note balance and interest at 30%
105,000
[(P300,000 + P50,000) x 30%]
Payment to Bank ,705,000
Fully secured P 3,000,000
Unsecured claim (PI,000,000 x 25%)
250,000
Amount received by the bank P3,250,000
8. When the Insolvent Company filed for bankruptcy, it prepared the following balance sheet:
Current assets (net realizable value P500,000) P 800,000
Land and building (fair market value P2,400,000) 2,000,000
Goodwill
400,000
P3,200,000
Accounts payable (unsecured) P1,600,000
Mortgage payable (secured by land and building) 2,000,000
Common stock 1,000,000
Retained earnings (deficit) ( 1,400,000)
P3,200,000
What percentage of their claims will the unsecured creditors likely to get?
a. 43.75%
b. 50%
c. 56.25%
d. 100%
Current assets at realizable value 500,000
Land and building at fair value 2,400,000
Less: Mortgage payable Total realizable value
2,000,000
400,000
Divided by accounts payable 1,600,000
Percentage of claims of unsecured creditors 56.25%
9. Sayap Company signed a note payable to its bank for P2,000,000. Accrued interest on the note on
February 29,
2008 amounts to P50,000. The note is secured by inventory with a book value of P2,300,000. The
inventory is sold
for P1,600,000 and unsecured creditors receive 30% of their claims. What amount should the bank
receive in
settlement of the note and interest?
a. P2,050,000
b. P2,000,000
c. P1,705,000
d. P1,600,000
Proceeds for inventory 1,600,000
Unsecured note balance and interest at 30%
105,000
[(P300,000 + P50,000) x 30%]
Payment to Bank ,705,000
Fully secured P 3,000,000
Unsecured claim (PI,000,000 x 25%)
250,000
Amount received by the bank P3,250,000
8. When the Insolvent Company filed for bankruptcy, it prepared the following balance sheet:
Current assets (net realizable value P500,000) P 800,000
Land and building (fair market value P2,400,000) 2,000,000
Goodwill
400,000
P3,200,000
Accounts payable (unsecured) P1,600,000
Mortgage payable (secured by land and building) 2,000,000
Common stock 1,000,000
Retained earnings (deficit) ( 1,400,000)
P3,200,000
What percentage of their claims will the unsecured creditors likely to get?
a. 43.75%
b. 50%
c. 56.25%
d. 100%
Current assets at realizable value 500,000
Land and building at fair value 2,400,000
Less: Mortgage payable Total realizable value
2,000,000
400,000
Divided by accounts payable 1,600,000
Percentage of claims of unsecured creditors 56.25%
9. Sayap Company signed a note payable to its bank for P2,000,000. Accrued interest on the note on
February 29,
2008 amounts to P50,000. The note is secured by inventory with a book value of P2,300,000. The
inventory is sold
for P1,600,000 and unsecured creditors receive 30% of their claims. What amount should the bank
receive in
settlement of the note and interest?
a. P2,050,000
b. P2,000,000
c. P1,705,000
d. P1,600,000
Proceeds for inventory 1,600,000
Unsecured note balance and interest at 30%
105,000
[(P300,000 + P50,000) x 30%]
Payment to Bank ,705,000
25. Estimated amount paid to unsecured creditors without priority is:
P70,000 c. P20,000
b. 61,600 d. 50,000
26. Estimated payment to partially secured creditors is:
a. P358,800 c. P168,000
b. 516,800 d. 430,000
27. Estimated payment to creditors is (discrepancy is expected due to rounding off).
a. P580,000 c. P571,000
b. 659,600 d. 668,400