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Corporate Liquidation

ILLUSTRATIVE PROBLEM

TROUBLED CORPORATION
STATEMENT OF FINANCIAL POSITION
MARCH 1, 2017

Assets
Current assets:
Cash P4000
Accounts receivable P20,000
Less: ADA 2,000 18,000
Marketable securities 8,000
Inventories 40,000
Total current assets 70,000

Property, plant and equipment


Cost Accum. Dep. Book Value
Land P10,000 - P10,000
Buildings 70,000 20,000 50,000
Machinery 30,000 16,000 14,000 74,000
Goodwill 6,000
Total assets P150000

Liabilities and Stockholders’ Equity


Current Liabilities:
Accounts payable P45,000
Accrued income taxes 4,000
Accrued interest on mortgage payable 2,000
Accrued salaries 13,000
Total current liabilities 64,000
Long term Liabilities:
Mortgage payable 50,000
Total Liabilities 114,000
Stockholders' equity
Common stock P54,000
Additional paid-in capital 6,000
Deficit (24000) 36,000
Total liabilities and stockholders' equity P150,000
Additional information:
1. Cash includes P300 of uncollectible IOU memos.
2. Receivables are estimated to produce P14,000.
3. Marketable securities have a market value of P9,000.
4. Sales of inventories should yield P11,000
5. Land and building can be sold for P64,000 cash and are pledged as collateral for the mortgage
payable and accrued interest.
6. The machinery will realize P3,000 which must be assigned to a creditor (accounts payable) who
is owed P3,800.

Required:
1. Statement of affairs
2. Deficiency Statement
3. Expected recovery rate
4. Estimated amount to be realized by the different creditors

The statement of realization and liquidation was prepared for Hopeless Corp. for the three-month
period December 31,2017. The totals are as shown below

Assets to be realized P1,575,000


Assets acquired 1,050,000
Assets realized 1,400,000
Assets not realized 1,225,000
Liabilities liquidated 2,875,000
Liabilities assumed 1,425,000
Liabilities to be liquidated 2,550,000
Liabilities not liquidated 1,100,000
Supplementary charges 3,125,000
Supplementary credits 3,850,000

The capital stock as of January 1, 2017 amounted to P500,000 and


Deficit (200,000).

Required:
1. Cash balance as of January 1, 2017
2. Net income(loss) for the period
3. Cash balance as of June 30,2017

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