The balance sheet of Evergreen Company at June 30, 2012 contains the following items: Assets Cash P 80,000 Accounts receivable (net) 140,000 Inventories 100,000 Land 260,000 Building – net 200,000 Machinery – net 120,000 Patent 100,000 Total P1,000,000 Liabilities and Stockholders’ Equity Accounts Payable P 220,000 Wages Payable 120,000 Taxes Payable 20,000 Mortgage Payable 300,000 Interest on Mortgage Payable 30,000 Notes Payable – unsecured 100,000 Interest Payable - unsecured 10,000 Capital Stock 400,000 Retained Earnings (deficit) (200,000) Total P1,000,000 The company is in financial difficulty, and its stockholders and creditors have requested a statement of affairs for planning purposes. The following information is available: The company estimates that P126,000 is the maximum amount of collectible for the accounts receivable. Except for 20% of the inventory items that are damaged and worth only P4,000, the cost of other items is expected to be recovered in full. The land and building have a combined appraisal value of P340,000 and are subject to the P300,000 mortgage and related accrued interest. The appraised value of the machinery is P40,000. Compute the following: How much is the net free assets? How much is the total unsecured liabilities with priority? How much is the total unsecured liabilities without priority?

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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The balance sheet of Evergreen Company at June 30, 2012 contains the following items:

Assets
Cash	P 80,000
Accounts receivable (net)	140,000
Inventories	100,000
Land	260,000
Building – net	200,000
Machinery – net	120,000
Patent	100,000
Total	P1,000,000

Liabilities and Stockholders’ Equity
Accounts Payable	P 220,000
Wages Payable	120,000
Taxes Payable	20,000
Mortgage Payable	300,000
Interest on Mortgage Payable	30,000
Notes Payable – unsecured	100,000
Interest Payable - unsecured	10,000
Capital Stock	400,000
Retained Earnings (deficit)	(200,000)
Total	P1,000,000

The company is in financial difficulty, and its stockholders and creditors have requested a statement of affairs for planning purposes. The following information is available:

The company estimates that P126,000 is the maximum amount of collectible for the accounts receivable.
Except for 20% of the inventory items that are damaged and worth only P4,000, the cost of other items is expected to be recovered in full.
The land and building have a combined appraisal value of P340,000 and are subject to the P300,000 mortgage and related accrued interest.
The appraised value of the machinery is P40,000.

Compute the following: