Bottomless Pit Inc. files a voluntary petition for bankruptcy on May 1, 200X which includes the following assets and liabilities: Carrying Realizable Amount Amount Assets Cash $2,000 $2,000 Accounts receivable 66,000 20,000 Inventory 6,000 3,000 Building 80,000 130,000 Equipment 36,000 10,000 Total Assets $190,000 $165,000 Liabilities Salaries payable $5,000 Taxes payable 10,000 Accounts payable 80,000 Loan payable 115,000 secured by building Liquidation costs payable 5,000 $215,000 Prepare a Statement of Affairs and a Schedule of Estimated Amounts to be Recovered by Creditors as of May 1, 200X. On May 1, 200X the Bankruptcy Court appointed you as trustee to administer the assets and liquidate the company. Show the journal entries transferring the assets and liabilities to you and for the following transactions for the month of May 200X: A. Sold the building for $120,000 and paid the loan. B. Collected $10,000 from the accounts receivable. Remainder is uncollectible C. Sold the equipment for $8,000 D. Paid the salaries and taxes payable. E. Sold all remaining inventory for $8,000 F. Paid liquidation costs. G. Distributed settlement to remaining creditors Prepare a Statement of Realization and Liquidation for Bottomless Pit for the month of May 200X.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bottomless Pit Inc. files a voluntary petition for bankruptcy on May 1, 200X which
includes the following assets and liabilities:

	Carrying	Realizable
	Amount	Amount
Assets

Cash	$2,000	$2,000
Accounts receivable	66,000	20,000
Inventory	6,000	3,000
Building	80,000	130,000
Equipment	36,000	10,000
Total Assets	$190,000	$165,000

Liabilities

Salaries payable	$5,000
Taxes payable	10,000
Accounts payable	80,000
Loan payable	115,000		secured by building
Liquidation costs payable	5,000
	$215,000

Prepare a Statement of Affairs and a Schedule of Estimated Amounts to be
Recovered by Creditors as of May 1, 200X.

On May 1, 200X the Bankruptcy Court appointed you as trustee to administer the assets
and liquidate the company. Show the journal entries transferring the assets and liabilities
to you and for the following transactions for the month of May 200X:

A. Sold the building for $120,000 and paid the loan.
B. Collected $10,000 from the accounts receivable. Remainder is uncollectible
C. Sold the equipment for $8,000
D. Paid the salaries and taxes payable.
E. Sold all remaining inventory for $8,000
F. Paid liquidation costs.
G. Distributed settlement to remaining creditors

Prepare a Statement of Realization and Liquidation for Bottomless Pit for the month of
May 200X.

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