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 Farmworth's 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.

b. 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

Receivables

Inventory

Plant and equipment

Total assets

Liabilities

Reported liabilities

Accrued liquidation cost

Total liabilities

Net assets