Use the following information for the next two questions:

Pitch Co. is undergoing liquidation. Information on Pitch Co assets and liabilities is shown below:

ASSETS BOOK VALUE REALIZABLE VALUE

Assets pledged to fully secured creditors 1,000,000 1,300,000

Assets pledged to partially secured creditors 500,000 300,000

Free assets 1,600,000 1,280,000

3,100,000 2,880,000

LIABILITIES

Unsecured liabilities with priority 400,000 480,000

Fully secured creditors 1,000,000 1,050,000

Partially secured creditors 650,000 650,000

Unsecured creditors without priority 1,400,000 1,400,000

3,450,000 3,580,000

1. What is the estimated recovery percentage of unsecured creditors without priority?

a. 60%

b. 75%

c. 78%

d. 80%

2.How much can the " partially secured creditors" expert to recover from their claims?

a. 432,000

b. 445,600

c. 510,000

d. 548,000

Use the following for the next four questions :

Monday Co.'s financial position before the start of its liquidation is as follows:

ASSETS LIABILITIES AND EQUITY

Cash 100,000 Accounts Payable 1,600,000

Accounts receivable 600,000 Income tax payable 900,000

Inventory 1,560,000 Note payable (secured by equipment) 1,000,000

Land 800,000 Loan payable (secured by land & bldg.) 1,200,000

Building 1,200,000 Share Capital 2,000,000

Equipment, net 400,000 Retained earnings (deficit) (2,040,000)

Total 4,660,000 Total 4,660,000

Additional Information :

• Only 60% of the accounts receivable is collectible.
• The entire inventory is expected to be sold half the price.
• The land and building are expected to be sold at a lump sum price of P2,300,000.
• The equipment is expected to be sold at its carrying amount but after refurbishment costs of P70,000.
• Certain accounts payable are measured gross of P23,000 cash discount which Monday intends to take. A supplier waived repayment of a P420,000 account.
• The taxing authority gave Monday a six-month tax amnesty to settle the tax liability for P780,000.
• Interests of P80,000 and P70,000 are expected to be paid on the note and loan, respectively.
• Liquidation costs of P120,000 are expected to be incurred.
• SSS, PhilHealth, and Pag-IBIG contributions of P160,000, not reflected on the balance sheet above, are expected to be paid.

3.How much is the estimated deficiency to unsecured creditors without priority?

a. 697,000 c. 767,000

b. 679,000 d. 817,000

4. How much are the total free assets?

a. 1,120,000

b. 1,907,000

c. 2,270,000

d. 2,315,000

5.The issuer of the note payable will probably recognize an impairment loss of, approximately,

a. 274,125.

b. 312,316.

c. 373,616.

d. 212,417.

6. Ms. B, an unsecured creditor without priority, has a claim of P90,000. How much can Ms. B expect to recover from her claim?

a. 49,614

b. 57,105

c. 51,690

d. 62,410

7.Paramount Co.'s statement of affairs shows net free assets of P520,000 (at realizable value) and unsecured liabilities without priority of P800,000 (at carrying amount). The accountants working papers show the following:

Suppliers Balances Notes

Athena Co. 600,000 Waived repayment of 100,000

Riley Co. 80,000 To be cancelled upon return of the goods

Naia Co. 120,000 Rebate of 50,000 is available

Total 800,000

What is the estimated recovery percentage of unsecured creditors without priority ?

a. 65 % b. 75% c. 80% d. 0%

Use of the following information for the next three questions :

Rainy Co.'s financial position before its liquidation is as follows :

ASSETS LIABILITIES AND EQUITY

Cash 100,000 Accounts Payable 1,600,000

Accounts receivable 600,000 Loan payable 1,500,000

Inventory 900,000 Share Capital 2,000,000

Equipment, net 400,000 Retained Earnings (deficit) (3,100,000)

Total 2,000,000 Total 2,000,000

Transactions in the first quarter of liquidation are as follows :

• 90% of the accounts receivable were collected. Commission of third party collectors amounted to P108,000. The collectors expect to collect the remaining receivables in the next quarter.
• Half of the inventory was sold at 80% of carrying amount. The other half is expected to be sold at 60% of carrying amount.
• The equipment was sold for P380,000 after it was refurbished for P50,000.
• P100,000 accounts payable were paid. The balance remains outstanding.
• Employee termination benefits of P100,000 were recorded and P80,000 of that amount were paid.
• The lender accepted P1,000,000 as full payment of the loan.

Liquidation costs of P50,000 were paid.

• Scrap materials from clearing the warehouse were sold for P10,000.

8.How much "liabilities liquidated" is presented on Rainy's statement of realization and liquidation?

a. 3,100,000

b. 1,290,000

c. 1,180,000

d. 1,520,000

9. How much net gain (loss) is reported on Rainy's statement of realization and liquidation?

a. 192,000

b. 178,000

c. (178,000)

d. (192,000)

10. How much is the ending balance of the "estate deficit" account?

a. 978,000

b. 1,008,000

c. 987,000

d. 1,122,000