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  • Corporate Liquidation Exercises

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    Arlene Diane Orozco
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    The document provides financial information for Heartbreak Company as of August 1, 2020. It lists estimated realizable values of the company's assets, including machinery pledged as collateral for a mortgage, inventory pledged for a partially secured loan, and free assets. It also lists estimated amounts that may be recovered by different classes of creditors, with unsecured priority creditors expected to recover 100% and general unsecured creditors expected to recover 57.93% of the amounts owed.

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    Corporate liquidation exercises

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    The document provides financial information for Heartbreak Company as of August 1, 2020. It lists estimated realizable values of the company's assets, including machinery pledged as collateral for a mortgage, inventory pledged for a partially secured loan, and free assets. It also lists estimated amounts that may be recovered by different classes of creditors, with unsecured priority creditors expected to recover 100% and general unsecured creditors expected to recover 57.93% of the amounts owed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    19 views3 pages

    Corporate Liquidation Exercises

    Uploaded by

    Arlene Diane Orozco
    The document provides financial information for Heartbreak Company as of August 1, 2020. It lists estimated realizable values of the company's assets, including machinery pledged as collateral for a mortgage, inventory pledged for a partially secured loan, and free assets. It also lists estimated amounts that may be recovered by different classes of creditors, with unsecured priority creditors expected to recover 100% and general unsecured creditors expected to recover 57.93% of the amounts owed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 3

    Arlene Diane Vaz Orozco

    HEARTBREAK COMPANY
    Statement of Affairs
    August 1, 2020
    Book Estimated Realizable Available for Unsecured
    Values Assets Values Creditors
    Pledged to fully secured creditors:
    383,488 Machinery and Equipment 241,562
    Less: Mortgage N/P (180,634 60,928
    Pledged to partially secured
    creditors:
    139,776 Inventory 64,512
    Free assets:
    14,336 Cash 14,336
    164,864 Accounts Receivable 164,864
    7,168 Office Supplies 8,960 188,160
    Total free assets 249,080
    Less: Creditors with priority
    Wages Payable 20,787
    Taxes Payable 4,301
    Liability to Trustee 93,184 -118,272
    Net free assets 130,808
    Estimated deficiency (to balance) 94,984
    709,632 225,792
           
    Problem 1

    HEARTBREAK COMPANY
    Estimated Amounts to Be Recovered by Creditors
    August 1, 2020
    Class of Creditors Total Claims Computations Estimated Recovery
    Unsecured with priority 118,272 100% 118,272
    Fully secured 180,364 100% 180,364
    Partially secured 75,264 64,512+(10,752x57.93%) 70,741
    Unsecured without priority 215,040 57.93% 124,573
    Totals 588,940 493,950
           
    130,808/225,792 = 57.93%

    Problem 2
    Requirement 1
    Cash 32,000
    Accounts receivable 64,000
    Inventory 288,000
    Land 160,000
    Building 800,000
    Intangible assets 208,000
    Accounts payable 400,000
    Notes payable 320,000
    Deferred Revenue 8,000
    Wages Payable 24,000
    Mortgage Note Payable 640,000
    Estate equity 160,000

    Additional information entries


    1. memorandum entry
    2. Deferred revenue 8,000
    Cash 8,000
    2.a. Estate equity 6,400
    Cash 57,600
    AR 64,000
    b. Cash 155,200
    Estate equity 132,800
    Inventories 288,000
    c. Estate equity 160,000
    Land 26,667
    Building 133,333
    d. Estate equity 208,000
    Intangible asset 208,000
    e. Estate equity 65,600
    Accrued expenses 65,600
    Requirement 2

    Problem 3
    71,000 – 69,000 = 2,000
    2,000 + 11,000 =13,000
    13,000 – 3,000 = 10,000 Net free asset

    20,000 – 12,500 = 7,500


    7,500 + 18,000 = 25,500

    25,500 – 10,000 = 15,500

    Problem 4
    Other Assets 80,000
    Add: (116,000 – 70,000) 46,000
    126,000
    Less: Liabilities w/ priority 42,000
    Total Free Asset 84,000

    Unsecured Creditors 200,000


    Add: (130,000 – 50,000) 80,000
    Unsecured Liabilities 280,000

    Free Asset 84,000


    Divided by: Unsecured Liability 280,000
    Percentage of liability to be paid 30%

    80,000 x 30% = 24,000


    50,000 + 24,000 = 74,000 money payable in partially secured debt

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