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  • CHAPTER 7-Corporations in Financial Difficulty: Liquidation

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    The document discusses two examples of corporations facing liquidation and calculating distributions to creditors. The first example involves Cebuano Company which has assets of $116,000 pledged against $70,000 in debt, $50,000 in assets pledged against $130,000 in debt, and $80,000 in other assets, as well as $42,000 in priority liabilities and $200,000 in unsecured creditors. The second example involves Moon Company which has various secured debts backed by pledged assets totaling less than the debt amounts, as well as $230,000 in unsecured creditors and $110,000 in priority liabilities. It asks how much additional assets would need to be sold to pay one of the

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    The document discusses two examples of corporations facing liquidation and calculating distributions to creditors. The first example involves Cebuano Company which has assets of $116,000 pledged against $70,000 in debt, $50,000 in assets pledged against $130,000 in debt, and $80,000 in other assets, as well as $42,000 in priority liabilities and $200,000 in unsecured creditors. The second example involves Moon Company which has various secured debts backed by pledged assets totaling less than the debt amounts, as well as $230,000 in unsecured creditors and $110,000 in priority liabilities. It asks how much additional assets would need to be sold to pay one of the

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    259 views1 page

    CHAPTER 7-Corporations in Financial Difficulty: Liquidation

    Uploaded by

    linkin soy
    The document discusses two examples of corporations facing liquidation and calculating distributions to creditors. The first example involves Cebuano Company which has assets of $116,000 pledged against $70,000 in debt, $50,000 in assets pledged against $130,000 in debt, and $80,000 in other assets, as well as $42,000 in priority liabilities and $200,000 in unsecured creditors. The second example involves Moon Company which has various secured debts backed by pledged assets totaling less than the debt amounts, as well as $230,000 in unsecured creditors and $110,000 in priority liabilities. It asks how much additional assets would need to be sold to pay one of the

    Copyright:

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    CHAPTER 7-Corporations in Financial Difficulty: Liquidation

    7-1 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) P116,000


    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. P130,000
    b. P 50,000
    c. P 74,000
    d. P200,000

    7-2 The Moon Company has the following:

    Unsecured creditors P 230,000


    Liabilities with priority 110,000
    Secured liabilities:
    Debt one, P210,000;value of pledged asset 180,000
    Debt two, P170,000;value of pledged asset 100,000
    Debt three, P210,000;value of pledged asset 140,000

    The company also has a number of other assets that are not pledged in any way. The creditors
    holding debt two want to receive at least P142,000. For how much do these free assets have to be
    sold so that debt two would receive exactly P 142,000?

    a. P308,000
    b. P198,000
    c. P340,000
    d. P330,000

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