The following balance sheet has been produced for Litz Corporation as of August 8, 2020, the date on which the company is to begin selling assets as part of a corporate liquidation: LITZ CORPORATION Balance Sheet August 8, 2020 Assets Cash $ 16,000 Accounts receivable (net) 82,000 Investments 32,000 Inventory (net realizable value is expected to approximate cost) 69,000 Land 30,000 Buildings (net) 340,000 Equipment (net) 210,000 Total assets $779,000 Liabilities and Equities Accounts payable $150,000 Notes payable—current (secured by inventory) 132,000 Notes payable—long term [secured by land and buildings (valued at $300,000)] 259,000 Common stock 135,000 Retained earnings 103,000 Total liabilities and equities $779,000 The following events occur during the liquidation process: The investments are sold for $39,000. The inventory is sold at auction for $48,000. The money derived from the inventory is applied against the current notes payable. Administrative expenses of $15,000 are incurred in connection with the liquidation. The land and buildings are sold for $315,000. The long-term notes payable are paid. The accountant determines that $34,000 of the accounts payable are liabilities with priority. The company’s equipment is sold for $84,000. Accounts receivable of $34,000 are collected. The remainder of the receivables is considered uncollectible. The administrative expenses are paid. Prepare a statement of realization and liquidation for the period just described. What percentage of their claims should the unsecured creditors receive?
The following
|
LITZ CORPORATION |
|
|---|---|
|
Assets |
|
|
Cash |
$ 16,000 |
|
|
82,000 |
|
Investments |
32,000 |
|
Inventory (net realizable value is expected to approximate cost) |
69,000 |
|
Land |
30,000 |
|
Buildings (net) |
340,000 |
|
Equipment (net) |
210,000 |
|
Total assets |
$779,000 |
|
Liabilities and Equities |
|
|
Accounts payable |
$150,000 |
|
Notes payable—current (secured by inventory) |
132,000 |
|
Notes payable—long term [secured by land and buildings (valued at $300,000)] |
259,000 |
|
Common stock |
135,000 |
|
|
103,000 |
|
Total liabilities and equities |
$779,000 |
The following events occur during the liquidation process:
-
The investments are sold for $39,000.
-
The inventory is sold at auction for $48,000.
-
The money derived from the inventory is applied against the current notes payable.
-
Administrative expenses of $15,000 are incurred in connection with the liquidation.
-
The land and buildings are sold for $315,000. The long-term notes payable are paid.
-
The accountant determines that $34,000 of the accounts payable are liabilities with priority.
-
The company’s equipment is sold for $84,000.
-
Accounts receivable of $34,000 are collected. The remainder of the receivables is considered uncollectible.
-
The administrative expenses are paid.
-
Prepare a statement of realization and liquidation for the period just described.
-
What percentage of their claims should the unsecured creditors receive?
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