The following balance sheet has been produced for Litz Corporation as of August 8, 2017, the date
Question:
The following balance sheet has been produced for Litz Corporation as of August 8, 2017, the date on which the company is to begin selling assets as part of a corporate liquidation:
LITZ CORPORATION
Balance Sheet
August 8, 2017
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,000
Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,000
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000
Inventory (net realizable value is expected to approximate cost) . . . . . . . . . . . . . 69,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Buildings (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000
Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $779,000
Liabilities and Equities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
Notes payable-current (secured by inventory) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,000
Notes payable-long term [secured by land
and buildings (valued at $300,000)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,000
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,000
Total liabilities and equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $779,000
The following events occur during the liquidation process:
∙ The investments are sold for $39,000.
∙ The inventory is sold at auction for $48,000.
∙ The money derived from the inventory is applied against the current notes payable.
∙ Administrative expenses of $15,000 are incurred in connection with the liquidation.
∙ The land and buildings are sold for $315,000. The long-term notes payable are paid.
∙ The accountant determines that $34,000 of the accounts payable are liabilities with priority.
∙ The Company's equipment is sold for $84,000.
∙ Accounts receivable of $34,000 are collected. The remainder of the receivables is considered uncollectible.
∙ The administrative expenses are paid.
a. Prepare a statement of realization and liquidation for the period just described.
b. What percentage of their claims should the unsecured creditors receive?
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Step by Step Answer:
a b Total amount available to pay liabilities with priority and unsecured creditors see part a 21400...View the full answer
Advanced Accounting
ISBN: 978-1259444951
13th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni
