Problem 3: Dartmouth INC. is planning to file for bankruptcy under Chapter 7. Their balance sheet for the year ended Dec 31, 2017 is given below: Balance Sheet on Dec 31, 2017 Assets $ Liabilities and OE $ Cash 16,400 Notes Payable 64,000 Note Receivable 48,000 Accounts Payable 390,000 Account Receivable 94,000 Salaries and wages Payable 27,000 Investments 35,000 Mortgage Payable 400,000 Inventory 205,400 Accrued Interest on: Land 533,000 Notes Payable 2,200 Equipment 186,000 Mortgage Payable 17,000 Share Capital 500,000 Retained Earnings (282,400) Total 1,117,800 Total 1,117,800 The note receivable (realizable at $32,000) are pledged as collateral on the note payable in the principle amount of $40,000 plus interest $1,400. The accounts receivable have an estimated realizable value of $50,000. The investments (realizable at $15,000) are pledged as collateral on the note payable in the principle amount of $24,000 plus interest of $800. Mortgage Payable along with interest payable of $17,000 is pledged against land that has a market value of 465,000. The estimated realizable values of inventory and equipment are $161,000 and 120,000 respectively. Required: Prepare the statement of affairs by hand on a sheet of paper and answer the following questions. (You are not required to send this sheet of paper to your instructor): After settling the note payable of $40,000 plus interest of $1,600, the resulting amount will be: Free assets of $8,000 Unsecured creditors of $9,400 Unsecured creditors of $8,000 Supplementary credits of 8,000

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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Problem 3: Dartmouth INC. is planning to file for bankruptcy under Chapter 7. Their balance sheet for the year ended Dec 31, 2017 is given below:

Balance Sheet on Dec 31, 2017

Assets	$	Liabilities and OE	$

Cash	16,400	Notes Payable	64,000
Note Receivable	48,000	Accounts Payable	390,000
Account Receivable	94,000	Salaries and wages Payable	27,000
Investments	35,000	Mortgage Payable	400,000
Inventory	205,400	Accrued Interest on:
Land	533,000	Notes Payable	2,200
Equipment	186,000	Mortgage Payable	17,000
		Share Capital	500,000
		Retained Earnings	(282,400)
Total	1,117,800	Total	1,117,800

The note receivable (realizable at $32,000) are pledged as collateral on the note payable in the principle amount of $40,000 plus interest $1,400.
The accounts receivable have an estimated realizable value of $50,000.
The investments (realizable at $15,000) are pledged as collateral on the note payable in the principle amount of $24,000 plus interest of $800.
Mortgage Payable along with interest payable of $17,000 is pledged against land that has a market value of 465,000. The estimated realizable values of inventory and equipment are $161,000 and 120,000 respectively.

Required: Prepare the statement of affairs by hand on a sheet of paper and answer the following questions. (You are not required to send this sheet of paper to your instructor):

After settling the note payable of $40,000 plus interest of $1,600, the resulting amount will be:

Free assets of $8,000
Unsecured creditors of $9,400
Unsecured creditors of $8,000
Supplementary credits of 8,000

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