Liquidation Basis of Accounting

On March 1, 2020, Farmworth Company is entering liquidation. The book value of its assets total $400,000, including $10,000 in cash, and the book value of its liabilities total $360,000. Additional information is as follows:

1. Expected proceeds from reported assets other than cash are:

Receivables, $30,000

Inventory, $70,000

Plant and equipment, $175,000

2. Expected costs of liquidating assets are $25,000.

Required

a. Calculate the cumulative effect of the adjustment to Farmworths net assets due to adoption of the liquidation basis of accounting.

Use a negative sign with your answer if the cumulative effect reduces net assets.

$Answer

b. Prepare a statement of net assets in liquidation as of March 1, 2020

Use a negative sign with your net assets answer, if appropriate.

Farmworth Company Statement of Net Assets in Liquidation March 1, 2020
Assets
Cash	Answer
Receivables	Answer
Inventory	Answer
Plant and equipment	Answer
Total assets	Answer
Liabilities
Reported liabilities	Answer
Accrued liquidation cost	Answer
Total liabilities	Answer
Net assets	Answer