Liquidation Basis of Accounting

Farmworth Company entered liquidation on March $1.$ The book value of its assets totaled $$400,000,$ including $$10,000$ in cash, and the book value of its liabilities totaled $$360,000.$ Expected proceeds from reported assets other than cash were:

Receivables, $$30,000$

Inventory, $$70,000$

Plant and equipment, $$175,000$

Expected costs of liquidating assets were $$25,000.$

During the three months ending June $1,$ the company collected $$10,000$ in receivables, sold inventory for $$30,000,$ and paid liquidation costs of $$12,000.$ Reported liabilities of $$30,000$ were paid. At the end of three months, estimated valuations on remaining assets and liabilities are as follows:

Expected proceeds from reported assets other than cash are:

Receivables, $$22,000$

Inventory, $$20,000$

Plant and equipment, $$160,000$

Newly identified unreported assets can be liquidated for an estimated $$8,000.$

Expected costs of liquidating assets are $$18,000.$

A creditor holding a loan with a book value of $$25,000$ agrees to accept $$15,000$ as full payment.

Required

a$.$ Prepare a statement of changes in net assets in liquidation as of June $1.$

Use negative signs with your answers, when appropriate.

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