Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Textbook Question
Chapter 13, Problem 48P
The following
LITZ CORPORATION Balance Sheet August 8, 2017 |
|
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.
- a. Prepare a statement of realization and liquidation for the period just described.
- b. What percentage of their claims should the unsecured creditors receive?
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Soft Bound Version for Advanced Accounting 13th Edition
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