Sample Problem of Corporation Liquidation

Bankrupt Corporation Statement of Affairs February 4, 2015 BV 200,000 160,000

190,500 160,000 158,000

62,000 80,000 10,000 63,500

1,084,000

Assets Pledged with Fully Secured Creditors: Land Building Total Mortgage Payable with Interest Pledged with Partially Secured Creditors: Investment in Stock (75%) Inventory Machinery & Equipment Total Free Assets: Cash Accounts Receivable Supplies Investment in Stock (25%) Total Free Assets Liabilities with Priority Net Free Assets Estimated Deficiency to Unsecured Creditors Total Free Assets

ERV/FMV 250,000 80,000 330,000 260,000 202,500 130,000 120,000 452,500 62,000 76,000 8,000 67,500

Free Assets

BV 40,000 18,000

70,000 250,000 10,000

244,000 6,000

280,000 213,500 283,500 58,000 225,500 140,000 365,500

288,000 (52,000) 1,084,000

Liabilities Liabilities with Priority Salaries Payable Taxes Payable Total Fully Secured Creditors: Mortgage Payable Interest on Mortgage Payable Total Partially Secured Creditors: Notes Payable Interest Payable Total Investment in Stock Bank Loan Inventory and Mach. & Equipment Unsecured Creditors: Accounts Payable Shareholders Equity: Estate Deficit Total Estimated Final Dividend Rate or Estimated Recovery Rate

Secured Amount

mated Recovery Rate

Unsecured Amounts

40,000 18,000 58,000 250,000 10,000 260,000 244,000 6,000 250,000 202,500 280,000 250,000

47,500 30,000 288,000 365,500 61.70%

Bankrupt Corporation Fritz Martin - Trustee Statement of Estate Deficit For the Six-Month Ending July 31, 2015

Estate Deficit, beginning Gain on Sale of Investment Loss on Collection of Accts. Rec. Loss on Sale of Merchandise Administrative Expenses Estate Deficit, End

(52,000) 6,000 (5,000) (25,000) (15,000)

(39,000) (91,000)

Bankrupt Corporation Fritz Martin - Trustee Statement of Realization and Liquidation For the Six-Month Ending July 31, 2015 Assets To be Realized @ Book Value Accounts Receivable Merchandise Inventory Supplies Investment in Common Stock Land Building Machinery & Equipment

80,000 160,000 10,000 254,000 200,000 160,000 158,000

1,022,000

Acquired @ Book Value

Total Assets Accountability

1,022,000 Liabilities

Liquidated: Bank Loan Notes Payable Interest Payable Salaries & Wages Taxes Payable

135,000 189,000 6,000 40,000 18,000

388,000 Not Liquidated: Notes Payable Accounts Payable Mortgage Payable Interest on Mortgage Payable Bank Loan Total Liabilities (Accountability)

Administrative Expenses Total

55,000 288,000 250,000 10,000 145,000

748,000 1,136,000 Supplementary Items 15,000 2,173,000

Assets Realized @ Realized Value Investment in Common Stock Accounts Receivable Merchandise Inventory

260,000 75,000 135,000

470,000 Not Realized @ Book Value Supplies Land Building Machinery & Equipment Total Assets Accounted For Liabilities To be Liquidated: Notes Payable Interest Payable Accounts Payable Mortgage Payable Interest on Mortgage Payable Salaries & Wages Taxes Payable Bank Loan

10,000 200,000 160,000 158,000

244,000 6,000 288,000 250,000 10,000 40,000 18,000 280,000

528,000 998,000

1,136,000

Liabilities Assumed/Incurred:

Total Liabilities Accounted For

lementary Items Net Effect to Estate Deficit Total

1,136,000

39,000 2,173,000

Bankrupt Corporation Fritz Martin - Trustee Statement of Financial Position As of July 31, 2015

Assets: Cash Supplies Land Building Machinery & Equipment Total Assets

129,000 10,000 200,000 160,000 158,000 657,000

Liabilities & Estate Deficit: Notes Payable Accounts Payable Mortgage Payable Interest on MP Bank Loan Estate Deficit Total Liabilities & Estate Deficit:

55,000 288,000 250,000 10,000 145,000 (91,000) 657,000

Fully Pledged Assets: Cash Accounts Receivable Merchandise Inventory Supplies Investment in Stock Land Building Machinery & Equipment Total Liabilities Notes Payable Interest Payable - NP Accounts Payable Mortgage Payable Interest Payable - MP Salaries Payable Taxes Payable Bank Loan Total

Partially Pledged

130,000 202,500 250,000 10,000 120,000 452,500

260,000 Fully Secured

Partially Secured 196,500 6,000 250,000 10,000

260,000

1 In the Statement of Affairs, how much is the Net Free Assets Total Free Assets Less: Liabilities with Priority Net Free Assets 2 How much is the Estimated Deficiency to Unsecured Creditors? Net Free Assets Less: Liabilities without Priority Estimated Deficiency 3 Total amount of unsecured creditor is: Liabilities without Priority

250,000 452,500

283,500 (58,000) 225,500

225,500 (365,500) (140,000)

365,500

4 Estimated Final Dividend Rate or Estimated Recovery Rate

5 In the Statement of liquidation and realization, how much is the proceeds from sale of assets duri the six month period? Cash Proceeds: Sold Investment in stocks

260,000

Collections from Accounts Receivable Sold Merchandise Total Cash Proceeds/Assets Realized 6 Total payment of liabilities in the six-month period is: Bank Loan Interest Payable - NP 6,000 Notes Payable 189,000 Liabilities with Priority Total paid liabilities/ Liquidated

75,000 135,000 470,000

135,000 195,000 58,000 388,000

7 Total loss on realization is: Asset Accounted for Asset Accountability Loss

998,000 1,022,000 (24,000)

Liabilities accounted for Liabilities accoutability Loss/Gain

1,136,000 1,136,000 -

Supplementary credit Supplementary debit Gain Total loss on realization

39,000 15,000 24,000 -

8 Net decrease in estate deficit as of July 31, 2015

(39,000)

9 Total assets as of July 31, 2015

657,000

10 Balance of the estate deficit as of July 31, 2015

(91,000)

Free Assets 62,000 76,000 8,000 67,500 70,000 283,500 Liabilities with Priority

eeds from sale of assets during

Liabilities without Priority 47,500 288,000

40,000 18,000 58,000

61.70%

30,000 365,500