Bottomless Pit Inc. files a voluntary petition for bankruptcy on May 1, 200X which includes the following assets and liabilities: Carrying Realizable Amount Amount Assets Cash $2,000 $2,000 Accounts receivable 66,000 20,000 Inventory 6,000 3,000 Building 80,000 130,000 Equipment 36,000 10,000 Total Assets $190,000 $165,000 Liabilities Salaries payable $5,000 Taxes payable 10,000 Accounts payable 80,000 Loan payable 115,000 secured by building Liquidation costs payable 5,000 $215,000 Prepare a Statement of Affairs and a Schedule of Estimated Amounts to be Recovered by Creditors as of May 1, 200X. On May 1, 200X the Bankruptcy Court appointed you as trustee to administer the assets and liquidate the company. Show the journal entries transferring the assets and liabilities to you and for the following transactions for the month of May 200X: A. Sold the building for $120,000 and paid the loan. B. Collected $10,000 from the accounts receivable. Remainder is still outstanding. C. Sold the equipment for $8,000 D. Paid the salaries and taxes payable. Prepare a Statement of Realization and Liquidation for Bottomless Pit for the month of May 200X.

Carrying Amounts Assets Current Fair Values Bottomless Pit Inc. Statement of Affairs 5/1/200X Estimated Loss or Amount (Gain) on Carrying Available Realization Amounts Assets: Unsecured with priority: $5,000 Salaries Payable $10,000 Taxes Payable $5,000 Liquidation Costs Payable $80,000 Building Less Loan Payable $6,000 $2,000 $66,000 $36,000 Inventories Cash Trade Accounts Receivable Equipment $115,000 Loan Payable $80,000 Trade Accounts Payable Total estimated amount available Less with priority Estimated amount available for unsecured creditors ($. on the dollar) $0 Amount Unsecured Liabilities and Equity $5,000 $10,000 $5,000 $20,000 $115,000 $80,000 $80,000 $0 $190,000 Total Liabilities Equity $215,000 Bottomless Pit Estimated Amounts to be Recovered by Creditors 5/1/200X Estimated Class of Creditor Total Claims Computation Recovery $215,000 ($25,000) $190,000 Estate Deficit: Equity Loss on Realization Estate Deficit: Unsecured with Priority Fully Secured Unsecured without Priority Book Balances May 1 Sold building and paid loan Collected accounts receivable Sold equipment Paid salaries and taxes Book balances May 31 Bottomless Pit Statement of Realization and Liquidation For the Month Ended May 31, 200X Non Cash Loan Salary Liq Costs Cash Assets Payable Payable Payable $2,000 $188,000 $115,000 $5,000 $5,000 Taxes Accounts Payable Payable $10,000 $80,000 Deficit ($25,000) Journal Entries Cash 2000 Accounts Receivable 20,000 Inventory 3,000 Building 130,000 Equipment 10,000 Estate Deficit 50,000 Salaries Payable Taxes Payable Accounts Payable Loan Payable Liquidation Costs Payable 5,000 10,000 80,000 115,000 5,000 Loan Payable Cash 115,000 115,000 Cash Estate Deficit Building 120,000 10,000 Cash Accounts Receivable Cash Estate Deficit Equipment Salaries Payable Taxes Payable Cash Cash 2,000 115,000 120,000 15,000 10,000 8,000 10,000 Accounts Receivable 20,000 10,000 10,000 Inventory 3,000 Equipment 10,000 10,000 0 Accounts Payable 80,000 Estate Deficit 50,000 10,000 2,000 62,000 Loan Payable 115,000 115,000 0 Salaries Payable 5,000 130,000 10,000 10,000 8,000 2,000 10,000 5,000 10,000 15,000 Building 130,000 130,000 0 Taxes Payable 10,000 10,000 0 Liq. Costs Payable 5,000 5,000 0