Narritive:

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

$190,000

$165,000

Liabilities

Liabilities
Salaries payable	$5,000
Taxes payable	10,000
Accounts payable	80,000
Loan payable	115,000
Liquidation costs payable	5,000
	$215,000

$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 uncollectible

C. Sold the equipment for $8,000

D. Paid the salaries and taxes payable.

E. Sold all remaining inventory for $8,000

F. Paid liquidation costs.

G. Distributed settlement to remaining creditors

Prepare a Statement of Realization and Liquidation for Bottomless Pit for the month of

May 200X.

Bottomless Pit Inc.

Statement of Affairs

5/1/200X

Current

Estimated

Loss or

Carrying

Fair

Amount

(Gain) on

Carrying

Amount

Amounts

Assets

Values

Available

Realization

Amounts

Liabilities and Equity

Unsecured

Assets:

Unsecured with priority:

$5,000

Salaries Payable

$5,000

$80,000

Building

$10,000

Taxes Payable

$10,000

Less Loan Payable

$5,000

Liquidation Costs Payable

$5,000

$20,000

$6,000

Inventories

$2,000

Cash

$66,000

Trade Accounts Receivable

$115,000

Loan Payable

$115,000

$36,000

Equipment

$80,000

Trade Accounts Payable

$80,000

$80,000

Total estimated amount available

$0

$0

Less with priority

Total Liabilities

$215,000

Estimated amount available for

unsecured creditors ($. on the dollar)

Equity

($25,000)

$190,000

$215,000

$190,000

Bottomless Pit

Estimated Amounts to be Recovered by Creditors

5/1/200X

Estimated

Class of Creditor

Total Claims

Computation

Recovery

Unsecured with Priority

Fully Secured

Unsecured without Priority

Bottomless Pit

Actual Amounts Recovered by Creditors

5/31/200X

Estimated

Class of Creditor

Total Claims

Computation

Recovery

Unsecured with Priority

Fully Secured

Unsecured without Priority

Bottomless Pit
Statement of Realization and Liquidation
For the Month Ended May 31, 200X
		Non Cash	Loan	Salary	Liq Costs	Taxes	Accounts
	Cash	Assets	Payable	Payable	Payable	Payable	Payable	Deficit
Book Balances May 1	$2,000	$188,000	$115,000	$5,000	$5,000	$10,000	$80,000	($25,000)
Sold building and paid loan
Collected accounts receivable
Sold equipment
Paid salaries and taxes
Sold inventory
Paid liquidation costs
Paid settlement to creditors
Book balances May 31