Statement of Changes in Net Assets in Liquidation

Mallorca Company began reporting using the liquidation basis of accounting on January $1.$ It is now June $30,$ and its balance sheet is as follows:

Cash $$1,000$ Accounts payable $$25,000$

Inventories $3,000$ Loan payable $21,000$

Equipment $40,000$ Accrued liquidation costs $3,000$

Net assets $(5,000)$

Total $$44,000$ Total $$44,000$

During the next six months, the following events occurred:

$1.$ The company$$s owner believes he may be able to negotiate the loan payable balance down to $$12,000.$

$2.$ Customer orders priced at $$10,000$ were discovered; estimated profit is $40$ percent on price, and the orders have not yet been delivered at year$-$end.

$3.$ Previously unreported software is discovered. Its estimated value is $$15,000,$ and costs to sell it are estimated to be $$1,000.$

$4.$ These transactions occurred: Inventory was sold for $$1,500$; equipment was sold for $$20,000$; liquidation costs of $$2,000$ were paid; accounts payable of $$9,500$ were paid, and $$9,000$ was paid on the loan.

$5.$ End$-$of$-$year liquidation values of remaining items other than cash are:

a$.$ Inventories, $$1,000$

b$.$ Equipment, $$18,500$

c$.$ Software, $$15,000$

d$.$ Estimated liquidation costs $($not including costs to liquidate the software$),$ $$4,000$

 

 

Required:

Prepare Mallorca Company$$s statement of changes in net assets in liquidation for the six months ending December $31.$ Use negatives as appropriate.

Mallorca Company

Statement of Changes in Net Assets in Liquidation

For the $6$ Months Ending December $31$

Net assets, July $1$ Answer $1$

$44,000$

Remeasurement adjustments on assets:

Receivables for customer orders Answer $2$

$0$

Software discovered Answer $3$

$0$

Inventories Answer $4$

$0$

Equipment Answer $5$

$0$

Adjustment for accrued liquidation costs Answer $6$

$0$

Net assets, December $31$ Answer $7$

$0$