CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA PRACTICAL ACCOUNTING PROBLEMS II CORPORATE LIQUIDATION GUERRERO/GERMAN/LIM/SIY/FERRER/DELA CRUZ Problem 1. ‘The Global Corporation is undergoing i financial position as of January 1, 2013: BATCH 76 uidation and has the following condensed statement of Assets Ciabittties'and SHE Cash P 114,200 / Salaries Payable P 50,000 tor, \o0 Receivables (net) ( 0) 340,800 Accounts Payable 108,500 Inventory 80,000 — Mortgage Payable — 4o4r- 47 4 400,000 WY “| Prepaid Expenses ~> 2,500 f boan Payable “220,000 {Building (net) 345,000 ‘wh Note Payable” 80,000 ae aes $20,260 Goodwill 535,000 Ordinary shares 120,000 a Deficit (41,000) 2). Total Assets P.937,500 "9, The mortgage payable is secured by the building having a realizable value of P360,000. Accounts payable amounting to P60,000 Is secured by the receivables amounting to P85,200 which is »/ collectible in the amount of P68,160) The balance in the book value of the receivables which has a realizable value of P235,000 Is used to secure the loan payable. The inventory-has a realizable value of P53,000. In addition to the recorded liabilities are accrued interest_on mortgage payable amounting to P4,000, liquidation expenses amounting to P9,500 and taxes amounting ta 4,000, (use ‘two decimal places for the recovery percentage) Which of the following statements is wrong? The estimated deficiency to unsecured creditors is P45,640. x Payment to partially secured creditors is P392,358 Payment to unsecured creditors without priority is P94,499/ Estimated loss on asset realization is P107,140 360T 4 goe> Problem 2. ‘The following information are related to Terminal Corporation which is undergoing liquidation: a, Bonds payable amounting to P73,600 is secured by Merchandise Inventory with book value of P123,000 and net realizable value of 2/3 af the recorded amount. b. Of the P195,600 accounts payable, P55,000 is secured by equipment with a carrying amount of P76,800 which is 70% realizable. 52,76 cc. Bullding with a carrying amount of P129,000 hes a net realizable value of P99,000. d. Other unrecorded liabilities are accrued interest payable on bonds, P3,100; salaries payable, P17,400; taxes payable, P11,600;.and trustee's fee, P8,500. — 4c PAR- 7OQS-e Cash available prior to liquidation amounts to P11,900, Total assets of Terminal Corp. presented in the statement of financial position prior to liquidation amounts to P480,000, except for prepaid expenses and goodwill with recorded amounts of P7,600 and P22,000, respectively, remaining assets other than those whose realizable values were mentioned above have a realizable value of 60% of the recorded amount. Total liabilities of Terminal Corp. presented in the statement of financial position prior to liquidation amounts to P380,000. Compute for the estimated deficiency to unsecured liabilities, \. P51,696 . P108,120 6c . P120,020 . P67,520 goe> Problem 3. ‘Twisted Corporation is undergoing liquidation. The trustee of Twisted Corp. presented the following, information: Assets amounting to 125,000 are available to unsecured liabilities without priority. Assets amounting to P110,000 represents assets originally not pledged to any liabilities. Unpaid liabilities are as follows: administrative expenses: P21,000; taxes: P18,000 and wages: P32,000. Accounts payable and notes payable totaled P180,000..No assets were pledged on the said liabilities. Payment to fully secured creditors and partially secured creditors amounts to P139,000 and P144,000 respectively. The expected recovery percentage is 40 percent. ' Amount of assets pledged to fully secured creditors A B. ia D. 139,000 225,000 235,000 249,000 Total liabilities 4 poe 522,500 534,000 613,500 + 49 580,000 ‘The amount to be paid to all creditors ({0'y poe 426,000 +4 187,500 , 479,000 210,000 Pi ~4 Q i A Y OSProblem 4, FVG Corporation has been undergoing liquidation since January 1. As of June 30, its condensed statement of realization and liquidation is presented below: Assets realized Interest on Investment Purchases. Assets Acquired liabilities assumed Payment of expenses of Liabilities to be liquidated Sales on Account Assets not realized liabilities not liquidated Sales for cash Assets to be realized Liabilities liquidated The net gain (loss) on realization and liquidation is: > P 306,250 B. (126,000) ; . P(306,250) D. P 126,000 PROBLEM 5. rustee P 525,000, * 2,625 A Dec. -rCr 26,250); Inc =) 87,500 26,250) \nc-» 131,250- 1,137,500 | Beg» Cr 87,500 | inc 735,000 /\ & 557,375 tht 437,500 1,662,500%B<9 > Pr 612,500 rr The following are the data before liquidating of XXX Corporation: Cash ‘Recounts Payable | P325,000, Short term investment Capital stock 250,000 “Accounts Receivable Deficit (75,000) Tnventory E Total assets 500,000 _| Total 500,000 Transactions during liquidation that did not involve cash were as follows: Sales of merchandise on account 25,000 Purchase of merchandise on account 7,500 Cash receipts and disbursements f Cash Receipts: Sale of merchandise 125,000 Collections of accounts receivable 57,500 Sale of marketable securities 92,500- Interest on short term investment 750 Cash disbursement: Payment of accounts payable 475,000 Payment of expenses of trustee 37,500 pag- 705°ee ‘At the end of the year, assets remaining to be realized and liabilities to be liquidated were as follows: Y ‘Accounts Receivable beg 150,000 | ee ss ‘Add: Sales on account 25,000__| 5 ; i Less: Collection on account 57,500 ni F oc Balance determine to be uncollectible 7,500.7 Accounts Receivable end 1 Mibeg fi 50,000__ | > ‘Add: Mi acquired 7,500 rgelicn 1350) Less: Cost of goods sold 157,500 7 Miend 100,000, ¢ ‘Accounts Payable beg 325,000 | ‘Add: Purchases on account [7,500 Less: Payment on account 775,000 ‘Accounts payable end 157,500 3 ‘Accrued expenses ending balance P 1,750” The net loss/ gain an realization and liquidation is: A. P15,000 gain B. 61,000 loss . P36,000 loss D. P10,000 loss -end of handouts- PAL-