When Philex Company filed for liquidation with the Securities and Exchange Commission, it prepared the following balance sheet.

Current assets, net realizable value, P50,000P80,000

Land and buildings, fair value, P240,000)200,000

Goodwill, fair value, P040,000

Total assetsP320,000

Accounts payableP160,000

Mortgage payable, secured by land and building200,000

Common stock100,000

Retained earnings, deficit( 140,000)

Total equitiesP 320,000

What is the estimated deficiency to unsecured creditors?

a. P120,000

b. P90,000

c. P140,000

d. P70,000

What percentage of their claims are the unsecured creditors likely to get?

a.

43.75%

b.

56.25%

c.

100.00%

d.

50.00%

I. Vina Co. has been forced into bankruptcy and liquidated. Unsecured claims will be paid at the rate of P0.50 on the peso. Jigs Co. hold a non-interest bearing note receivable from Vina Co. in the amount of P50,000 collateralized by machinery with a liquidation value of P10,000.

The total amount to be realized by Jigs on this note receivable is:

a.

P25,000

b.

P10,000

c.

P35,000

d.

P30,000

II. REH Co. filled a voluntary bankruptcy petition on August 15, 2014 and the statement of affairs reflect the following amounts:

Assets pledge with fully secure creditors

Assets pledge with partially secured creditors

Free Assess

Liabilities with priority

Fully secured creditors

Partially secured creditors

Unsecured creditors

BOOK CARRYING VALUE

P 150,000

90,000

210,000

P 450,000

Liabilities

P 35,000

130,000

100,000

270,000

P 535,000

ESTIMATED CURRENT VALUE

P 185,000

60,000

160,000

P 405,000

Assumes that the assets are converted into cash at the estimated current value and the business is liquidated. How much cash will be available to pay the unsecured non-priority claims?

a.

P160,000

b.

P125,000

c.

P180,000

d.

P240,000

III. The Metro Bank loaned P40,000 to Ilocano Company. The loan is secured by inventory with a book value and fair value of P50,000 and P30,000, respectively. What amount will the bank receive if unsecured creditors receive 25% of their claims?

a.

40,000

b.

30,000

c.

10,000

d.

32,500

IV. The Abra Company owes P200,000 on a note payable plus P8,000 in interest to its bank. The note is secured by inventory with a book value of P160,000 and a fair value of P120,000. What amount will the bank receive if unsecured creditors receive 75% of their claims?

a.

180,000

b.

120,000

c.

186,000

d.

160,000

V. The Red Company owes P15,000,000 on the mortgage of its building to City Bank. The building has a net book value of P20,000,000 and a fair value of P18,000,000. When Red company filed for liquidation, it owed interest of P90,000; when the building is sold for P18,000,000, the interest due on the mortgage is P200,000. What amount will the bank receive if the unsecured creditors received 80% of their claims?

a.

15,200,000

b.

15,178,000

c.

15,160,000

d.

15,000,000

VI. A company is to be liquidated and has the following liabilities:

Income taxes

8,000

Notes payable (secured by land)

120,000

Accounts payable

83,000

Salary payable (evenly to two employees)

6,000

Bonds payable

70,000

Administrative expenses for liquidation

20,000

The company has the following assets:

Book value

Fair value

Current assets

80,000

33,000

Land

100,000

90,000

Building and equipment

100,000

110,000

How much will the holders of notes payable collect following the liquidation?

a.

108,000

b.

83,000

c.

90,000

d.

120,000

VII. Cebuano company has had severe financial difficulties and is considering the possibility of liquidation. At this time, the company has the following assets (stated at net realizable value) and liabilities.

Assets (pledged against debts of P70,000)

116,000

Assets (pledged against debts of P130,000)

50,000

Other assets

80,000

Liabilities with priority

42,000

Unsecured creditors

200,000

In liquidation, how much would be paid to the partially secured creditors?

a.

50,000

b.

130,000

c.

74,000

d.

200,000