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CHAPTER 16 SUGGESTED ANSWERS

Exercise 16 - 1 Watson Co., Debtor C. Gonzales, Trustee Statement of Realization and Liquidation For the Month Ended December 31, 200__ Assets Assets to be realized: Receivables, old Merchandise inventory, Dec. 1 Furniture and fixtures Assets acquired: (3) Receivables, old Assets realized: P180,000 (2) Receivables, old 200,000 (2) Receivables, new 75,000 Assets not realized: 9,000 Receivables, old Receivables, new Merchandise inventory, Dec. 31 Furniture and fixtures Liabilities Liabilities not liquidated: Accounts payable, old 275,000 Liabilities to be liquidated: Accounts payable 275,000 P 92,500 2,250 84,250 6,750 112,500 73,750

Revenues and Expenses Supplementary charges: (4) Purchases (5) Expenses Net gain Total 200___ Dec. 1 1-31 Supplementary credits: 3,750 (1) Sales for cash 7,000 (3) Sales on account P749,750 26,250 P776,000 Total Cash Balance (1) Cash sales of merchandise (2) Collections of receivables 200__ P 60,000 Dec. 1-31 120,000 94,750 Dec. 31 P274,750 P264,000 Capital Stock 2000___ (4) Payments for merchandise purchased (5) Payment of expenses Balance 120,000 9,000 P776,000

3,750 7,000 264,000 P274,750

200__ Jan. 1

Balance

Chapter 16 - Suggested Answers

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Dec. 1 Retained Earnings 200____ P 10,000 Dec. 31

Balance

P250,000

200____ Dec. 1

Balance

Net gain for December

P26,250

Watson Co., Debtor Balances per Statement of Realization and Liquidation December 31, 200__ Assets Cash Assets not realized Total assets Liabilities and Stockholders' Equity P264,000 Liabilities not liquidated P275,000 277,250 Capital stock 250,000 _______ Retained earnings 16,250 Total liabilities and P541,250 stockholders' equity P541,250

Exercise 16 -2 a. b. Dr. Accounts Receivable - "Assets acquired" Cr. Sales - "Supplementary credits" Dr. Cash - Cash Schedule Cr. Accounts Receivable - "Assets realized" 125,000 125,000 67,500 67,500

No entry is needed for the accounts written off; the balance of accounts receivable of ___ is reduced by P2,500 and is entered in the "Assets to be realized" section. c. d. e. Dr. Cash - Cash Schedule Cr. Securities - "Assets realized" Dr. Purchases - "Supplementary charges" Cr. Accounts Payable - "Liabilities assumed" Dr. Accrued Selling Expenses - "Liabilities liquidated" Dr. Selling Expenses - "Supplementary charges" Cr. Cash 82,000 82,000 87,500 87,500 4,000 19,750 23,750

f. g

No entry is needed for the depreciation; the balance of furniture and fixtures is reduced by P1,375 and is entered in the "Assets to be realized" section. Dr. Truck - "Assets acquired" Cr. Cash - "Cash schedule" Cr. Truck - "Assets realized" Dr. Accounts Payable - "Liabilities liquidated" Cr. Cash - Cash Schedule 11,000 6,000 5,000 49,000 49,000

h.

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Exercise 16-3 Liabilities Assets Noncash 590,000 (25,000) (54,000) (12,000) 15,000 22,500 (25,000) 36,000 (36,000) 66,500 (18,000) (3,200) (25,000) (45,000) (36,000) (14,000) 113,000 14,000 83,000 (9,000) (15,000) 4,500 (3,200) Fully Secured 200,000 Partially Secured 175,000 Unsecured With Without Priority Priority 54,000 150,000 Owners' Equity 23,000 (5,000) (19,000)

Beg. Balances Sale of inventory Collection of rec'l Payment of loan Equipment rental Sale of securities Depreciation on mach. Payment of accounts pay Sale of machinery Payment of loan Reclassification of loan Balances

Cash 12,000

30,000 39,000 (12,000)

444,800

175,000

150,000 (23,700)

2. Liabilities and Owners Equity Fully secured liabilities (50,000 36,000 = 14,000) Partially secured liabilities Unsecured liabilities: With priority Without priority Book Value 113,000 175,000 83,000 150,000 410,000 Estimated Distribution 113,000 175,000 83,000 39,000 410,000 Dividend Payout % 100% 100% 100% 26%