CORPORATE LIQUIDATION.docx

CORPORATE LIQUIDATION

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Problem 1. The Global Corporation is undergoing liquidation and has the following condensed statement of financial position as of January 1, 2013: ASSETS LIABILITIES AND SHE Cash P114,200 Salaries Payable P50,000 Receivables, net 340,800 Accounts Payable 108,500 Inventory 80,000 Mortgage Payable 400,000 Prepaid expenses 2,500 Loan Payable 220,000 Building (net) 345,000 Note Payable 80,000 Goodwill 55,000 Ordinary shares 120,000 Deficit (41,000) Total Assets P 937,500 P 937,500 The mortgage payable is secured by the building having a realizable value of P360,000. Accounts payable amounting to P60,000 is secured by receivables amounting to P85,200 which is collectible in the amount of P68,160. The balance in the book value of the receivables which has a realizable value of P235,000 is used to secure the loan payable. The inventory has a realizable value of P53,000. In addition to the recorded liabilities are accrued interest on mortgage payable amounting to P4,000, liquidation expenses amounting to P9,5000 and taxes amounting to P4,000. (use two decimal places for the recovery percentage) Which of the following statements is wrong? A. The estimated deficiency to unsecured creditors is P45,640. B. Payment to partially secured creditors is P392,358. C. Payment to unsecured creditors without priority is P94,499. D. Estimated loss on asset realization is P107,140. Problem 2. The following data are provided by Worldwide Corporation which is undergoing liquidation process:  Total liabilities amounts to P692,000. 35% is fully secured by assets amounting to P270,000 with fair market value of P250,000; 40% is partially secured by assets amounting to P300,000 with a realizable value of P225,000; and the remaining balance is unsecured.  Total assets amounts to P890,000 and has a total fair market value P695,000  Unpaid income taxes amounts to P35,000. Additional salaries payable and administrative expenses totalled P28,000  Deficit amounts to P79,000 Which of the following statements is correct? A. Assets available to all unsecured creditors with and without priority is P227,800 B. The amount paid to partially secured creditors is P225,000 C. The estate deficit amount to P60,000 D. The amount paid to all secured creditors is P695,000 Problem 3. A review of the assets and liabilities of Atlantis Corporation in bankruptcy on Nov. 30, 2013, discloses the following:  A mortgage payable of P77,000, is secured by building valued at P14,000 more than its book value of P68,000  Notes payable of P39,000 is secured by furniture and equipment with book value of P46,000 that is estimated to be 4/5 realizable  Assets other than those referred to have estimated value of P25,000, an amount that is P6,000 above its book value  Liabilities other than those referred to total P31,000, which excluded claims with priority of P8,000 Which of the following statements is true? A. Actual recovery percentage is 66.27% B. Total free assets is P22,000 C. Estimated deficiency to unsecured creditors is P11,200

CORPORATE LIQUIDATION

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CORPORATE LIQUIDATION

#0011

D. Payment to partially secured creditors amount to P36,800 Problem 4. Twisted Corporation is undergoing liquidation. The trustee of Twisted Corp. presented the following information: Assets amounting to P125,000 are available to unsecured liabilities without priority. Assets amounting to P110,000 represents assets originally not pledged to any liabilities. Unpaid liabilities are as follows: administrative expenses, P21,000; taxes, P18,000 and wages, P32,000. Accounts payable and notes payable totalled P180,000. No assets were pledged on the said liabilities. Payment to fully secured creditors and partially secured creditors amounts to P139,000 and P144,000 respectively. The expected recovery percentage is 40 percent. Amount of assets pledged to fully secured creditors A. P139,000 B. P225,000 C. P235,000 D. P249,000 Total liabilities A. P522,500 B. P534,000 C. P613,500 D. P580,000 The amount to be paid to all creditors A. P426,000 B. P187,500 C. P479,000 D. P210,000 Problem 5. The following data were taken from the statement of realization and liquidation of intercontinental Corporation for the quarter ended June 30, 2013 Assets to be realized P515,625 Supplementary credits 796,875 Liabilities to be liquidated 843,750 Supplementary charges 731,250 Liabilities liquidated 562,500 Assets acquired 562,500 Assets realized 656,250 Liabilities assumed 281,250 Assets not realized 234,375 The ending capital balances of capital stock and retained earnings are P648,750 and P178,500, respectively. A net loss of P226,500 for the period. How much is the ending balance of cash? A. P1,125,000 B. P1,260,000 C. P978,750 D. P807,000 *** END ***

CORPORATE LIQUIDATION

#0011