A statement of financial affairs created for an insolvent corporation that is beginning the process of liquidation discloses the following data (assets are shown at net realizable values):
Assets pledged with fully secured creditors . . . . . . . . . . . . . . . . . . . | $220,000 |
Fully secured liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 160,000 |
Assets pledged with partially secured creditors . . . . . . . . . . . . . . . | 390,000 |
Partially secured liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 510,000 |
Assets not pledged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 310,000 |
Unsecured liabilities with priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 182,800 |
Accounts payable (unsecured) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 400,000 |
- a. This company owes $13,000 to an unsecured creditor (without priority). How much money can this creditor expect to collect?
- b. This company owes $120,000 to a bank on a note payable that is secured by a security interest attached to property with an estimated net realizable value of $90,000. How much money can this bank expect to collect?
a.
Find how much money this creditor can expect to collect.
Explanation of Solution
Computation of the amount which the creditor can expect to collect:
Working note:
Computation of available amount of assets:
Computation of amount for unsecured creditors:
Computation of total unsecured liabilities:
Computation of percentage for unsecured creditors:
b.
Find how much money this bank can expect to collect.
Explanation of Solution
Computation of the amount which the bank can expect to collect:
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Chapter 13 Solutions
ADVANCED ACCOUNTING
- A statement of financial affairs created for an insolventcorporation that is beginning the process of liquidation disclosesthe following data (assets are shown at net realizable values): Assets pledged withfully secured creditors $ 220,000 Fully securedliabilities 160,000 Assets pledged withpartially secured creditors 390,000 Partially securedliabilities 510,000 Assets notpledged 310,000 Unsecuredliabilities with priority 182,800 Accounts payable(unsecured) 400,000 a. This company owes $13,000 to an unsecured creditor (withoutpriority). How much money can this creditor expect to collect? b. This company owes $120,000 to a bank on a note payable that issecured by a security interest attached to property with anestimated net realizable value of $90,000. How much money can thisbank expect to collect?arrow_forwardJack Company is a corporation that was organized on July 1, 2015. The June 30, 2020, balance sheet for Jack is as follows:AssetsInvestments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . $ 400,500Accounts receivable . . . . . . . . . . . . . . . . .$1,250,000Allowance for doubtful account. . . . . . . (300,000) 950,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 18,000Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,000Machinery and equipment (net) . . . . . . . . . . . . . . . .. . . . . . . 1,473,500Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$4,500,000Liabilities and EquityCurrent…arrow_forwardThe trial balance of Kroeger Incorporated included the following accounts as of December 31, 2024: Sales revenue Interest revenue Gain on sale of investments Gain on debt securities Cost of goods sold Loss on projected benefit obligation Selling expense Goodwill impairment loss Interest expense General and administrative expense Debits Credits $ 8,350,000 55,000 115,000 137,500 $ 155,000 6,155,000 750,000 525,000 25,000 450,000 The gain on debt securities represents the increase in the fair value of debt securities and is classified a component of other comprehensive income. Kroeger had 300,000 shares of stock outstanding throughout the year. Income tax expense has not yet been recorded. The effective tax rate is 25%. Required: Prepare a 2024 separate statement of comprehensive income for Kroeger Incorporated. Note: Amounts to be deducted should be indicated with a minus sign. KROEGER INCORPORATED Statement of Comprehensive Income For the Year Ended December 31, 2024 Net income Other…arrow_forward
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- Instructions: (Assume all transactions during the year were for cash.) a. Prepare the journal entry to record the sale of the available-for-sale debt securities in 2020. b. Prepare the journal entry to record the Unrealized Holding Gain or Loss for 2020. c. Prepare a statement of comprehensive income for 2020. d. Prepare a balance sheet as of December 31, 2020arrow_forwardA company going through a Chapter 7 bankruptcy has the following account balances: Cash . . . . . . . . . . . . . . . . . . $ 30,000 Receivables (30% collectible) . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 50,000Inventory (worth $39,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 90,000Land (worth $120,000) (secures note payable) . . . . . . . . . . . . . . . 100,000Buildings (worth $180,000) (secures bonds payable) . . . . . . . . . . 200,000. Salaries payable (Four workers owed equal amounts for last two weeks) . . . 10,000Accounts payable . . . . . . . . . .90,000Note payable (secured by land) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000Bonds payable (secured by building) . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 100,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .…arrow_forwardCoop Incorporated has the following assets and liabilities (assets are stated at net realizable value): Assets pledged with secured creditors $ 80,000 Assets pledged with partially secured creditors 70,000 Other assets 180,000 Secured liabilities 40,000 Partially secured liabilities 95,000 Liabilities with priority 55,000 Unsecured liabilities 225,000 In a liquidation, what is the amount of free assets after payment of liabilities with priority? A. $180,000 B. $165, 000 C. $70,000 D. $95,000 E. $160,000arrow_forward
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