Journal Entries for Bankruptcy Trustee

The balance sheet of the Binder Company immediately prior to entering bankruptcy proceedings and a balance sheet prepared during liquidation follows:

BINDER COMPANY
Balance Sheet
June 30, 2020
Cash	$ 2,000		Accounts Payable	$ 40,000
Accounts receivable	10,000		Accrued wages*	7,000
Inventories	30,000		Taxes payable	8,000
Equipment, net	53,000		Notes payable**	70,000
Land	15,000		Shareholders' equity	(15,000)
Total assets	$110,000		Total liabilities and equity	$110,000

* Amounts due do not exceed statutory limits per employee.

** Of the notes payable, $25,000 are secured with inventory having a book value of $25,000. The remaining notes payable and the accounts payable are unsecured.

BINDER COMPANY, Alfred Wade, Trustee,
Balance Sheet
December 31, 2020
Cash	$9,250	Accounts payable	$30,000
Equipment, net	53,000	Notes payable	41,250
		Estate deficit	(9,000)
Total assets	$62,250	Total liabilities and equity	$62,250

The inventory was sold at 60 percent of its book value. Eighty percent of the accounts receivable were collected; the rest were written off.

Required

Reconstruct the journal entries made by Alfred Wade, Trustee for Binder Company, from June 30 to December 31, 2020.

Journal Entries
Ref.	Description	Debit	Credit
(1)	Cash	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To record sale of inventories.
(2)	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To record payment to secured creditor.
(3)	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To record payment of wages.
(4)	Cash	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To record collection and write-off of accounts receivable.
(5)	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To record payment of taxes.
(6)	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	Accounts payable	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To record payments to unsecured creditors.
(7)	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	Land	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To record sale of land.
Closing entry:	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	Loss on realization	Answer	Answer
	AnswerLoss on realizationInventoriesNotes payableCashAccrued wagesAccounts receivableTaxes payableGain on realizationEstate deficit	Answer	Answer
	To close at December 31, 2020.