PROBLEM 10-3 Statement of Affairs and Deficiency Account L01Prost Company has filed a bankruptey petition. Its account balances at December 31, 2012,are presented here:$ 2,500CashNotes ReceivableAccounts Receivable (net)InventoriesFinished GoodsWork in Process60,00076,00043,00060,00051,0004,00012,000Raw MaterialsPrepaid ExpensesInvestment in StockLandProperty and Equipment (net)GoodwillTotal140,000400,00010,000$858,500Accounts PayableAccrued Wages (all with priority)Bank Notes PayableMortgage PayableCommon StockRetained Earnings (deficit)Total$220,00045,000225,000350,000380,000(361,500)$858,500The following additional information is available:1. All notes receivable with the exception of one for $2,500 are expected to be collected.The notes receivable are pledged as security on the bank notes payable.2. Of the total accounts receivable, $55,000 is expected to be collected. The accountsreceivable are also pledged as security on the bank notes payable.3. Finished goods can be sold at 30% above cost. Selling expenses will be approximately15% of selling price. Work in process is to be completed at an additional cost of $30,000,of which $19,000 represents the cost of raw materials. The expected selling price of thework in process (after completion) is 10% above cost, with selling expenses of 15% ofselling price. Unused raw materials can be sold for $18,000.4. Prepaid expenses are fully recoverable.5. The investment in stock consists of 100 shares of MBI Company with a current marketvalue of $19,000.6. Land is appraised at $200,000, and plant and equipment is appraised at $205,000. Theland and plant and equipment serve as collateral on the mortgage payable. Accrued butunrecorded interest on the mortgage payable amounts to $3,000.RequiredA. Prepare a statement of affairs, including a deficiency account.B. Compute the estimated dividend to be paid general unsecured creditors.

Statement of Affairs It is similar to a balance sheet. For this purpose, two comparative…

Prost Company has filed a bankruptcy petition. Its account balances at December 31, 2012, are presented here: Cash Notes Receivable $ 2,500 60,000 76,000 Accounts Receivable (net) Inventories Finished Goods Work in Process 43,000 60,000 Raw Materials Prepaid Expenses Investment in Stock 51,000 4,000 12,000 Land 140,000 400,000 10,000 $858,500 Properny and Equipment (net) Goodwill Total Accounts Payable Accrued Wages (all with priority) Bank Notes Payable Mongage Payable Common Stock $220,000 45,000 225,000 350,000 380,000 (361,500) $858 500 Retained Earnings (deficit) Total The following additional information is available: 1. All notes receivable with the exception of one for $2,500 are expected to be collected. The notes receivable are pledged as security on the bank notes payable. 2. Of the total accounts receivable, $55,000 is expected to be collected. The accounts receivable are aso pledged as security on the bank notes payable. 3. Finished goods can be sold at 30% above cost. Selling expenses will be approximately 15% of selling price. Work in process is to be completed at an additional cost of $30,000, of which $19,000 represents the cost of raw materials. The expected selling price of the work in process (after completion) is 10% above cost, with selling expenses of 15% of selling price. Unused raw materials can be sold for $18,000. 4. Prepaid expenses are fully recoverable. 5. The investment in stock consists of 100 shares of MBI Company with a current market value of $19,000. 6. Land is appraised at $200,000, and plant and equipment is appraised at $205,000. The land and plant and equipment serve as collateral on the mortgage payable. Accrued but unrecorded interest on the mortgage payable amounts to $3,000. Required A. Prepare a statement of affairs, including a deficiency account. B. Compute the estimated dividend to be paid general unsecured creditors.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q