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 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 |
|
|---|---|
|
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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