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Toaz - Info Corporate Liquidation PR
Toaz - Info Corporate Liquidation PR
1.) Part Corporation is a parent, having purchased 80% of Sand Company’s common stock at par
value for P800,000. Sand company is in a financial difficulty. The parent granted an unsecured
loan of P400,000 to the subsidiary. And accounting statement of affairs for Sand Company shows
a dividend of 40%. Part Corporation can expect to receive payment for its investment in Sand
Company approximately:
A.) P640 000 C.)P150 000
B.) P320 000 D.)P 0
Since there is a parent and a subsidiary relationship, any intercompany accounts are
eliminated from consolidated point of view.
2.) The following items were displayed in the statement of affairs of AA Company:
Unsecured liabilities without priority……………………. P 90 000
Stockholders’ equity……………………………………… 36 000
Loss on realization of assets……………………………. 45 000
Estimated administrative costs that have been entered
in the accounting records………………………………… 4 500
Unsecured liabilities with priority…………………………. 10 000
Based on the foregoing information, what percentage of their claims should unsecured, non-
priority creditors expect to receive on the liquidation of AA Company?
Compute the cost per peso that unsecured creditors may expect to receive from Windup
Company.
4.) Zero Na Corp. has been undergoing liquidation since January 1. As of March 31, its condensed
statement of realization and liquidation is presented below:
Assets:
Assets to be realized…………………………………………….P 1 375 000
Assets acquired…………………………………………………… 750 000
Assets realized…………………………………………………… 1 200 000
Compute the ending cash account assuming that common stock and deficits are P1 500 000 and
P500 000, respectively:
A company enters into bankruptcy proceedings on April 30. Its balance sheet on that date is as follows:
Merchandise with a book value of P45 000 was sold for P30 000.
Plant and equipment with a book value of P40 000 was sold for P25 000.
Wages and administrative expenses of P10 000 were accrued.
An initial payment of 30 cents per peso of indebtedness was paid to the unsecured
creditors.
5.) The statement of realization and liquidation would show a total (1) “assets to be realized” and (2)
assets not realized of:
A.) (1) P160 000; (2) P105 000 C.) (1) P105 000; (2) P75 000
B.) (1) P105 000; (2) P160 000 D.) None of the above.
(1)P160 000; (2)P75 000
6.) The statement of realization and liquidation would show (1) “liabilities not liquidated” and (2)
“liabilities not liquidated” of
A.) (1) P154 000; (2) P230 000 C.) (1) P220 000; (2) P164 000
B.) (1) P164 000; (2) P220 000 D.) None of the above.
7.) Lakeside Bank holds a P100 000 note secured by a building owned by Fly-By –Night
Manufacturing, which has filed for bankruptcy. If the property has a book value of P120 000 and a
fair market value of P90 000, what is the best way to describe the note held by Second Bank and
Trust Company? The bank has a(n):
A.) A secured claim of P100 000
B.) Unsecured claim of P100 000
C.) Secured claim of P90 000 and an unsecured claim of P10 000
D.) Secured claim of P100 000 and an unsecured claim of P20 000
It is a partially secured liability.
8.) Rap Company is insolvent and its statement of affairs shows the following information:
Estimated gains on realization of assets…………………………P 1 440 000
Estimated losses on realization of assets……………………….. 2 000 000
Additional assets…………………………………………………… 1 280 000
Additional liabilities………………………………………………… 960 000
Capital stock……………………………………………………….. 2 000 000
Deficit……………………………………………………………….. 1 200 000
560 000
800 000
9.) Second City bank holds a P50 000 note secured by a building owned by Desk Drawer Software,
which has filed for bankruptcy under the Insolvency Law. If the property has a book value of P60
000 and a fair market value of P45 000, what is the best way to describe the note held by Second
City Bank? The bank has:
A.) Secured claim of P50 000
B.) Unsecured claim of P50 000
C.) A secured claim of P5 000 and unsecured claim of P45 000
D.) A secured claim of P45 000 and unsecured claim of P5 000
10.) S and L owes the Merlin Corporation P6 000 on account, which is secured by accounts
receivable with a book value of P5 000. Its statement of affairs lists the accounts receivable
securing the Merian account with an estimated realizable value of P4 500. If the dividend to
general unsecured creditors is 80%, how much can Merian expect to receive?
A.) P6 000 C.) P5 700
B.) P5 800 D.) P4 800
4 500 + (1 500 x 80%) = P5 700
Items 11 to 15 are based on the following information:
11.) NG Company filed a voluntary bankruptcy petition, and the settlement of affairs reflected the
following amounts:
Assets Book Value Estimated Current Value
Assets pledged with
fully secured creditors P 450 000 P 550 000
Assets pledged partially
secured creditors 270 000 180 000
Free assets 630 000 480 000
P1 350 000 P1 215 000
Liabilities
P1 605 000
Assume the assets are converted to cash to their estimated current values. What amount of cash
will be available to pay unsecured, non-priority claims?
A.) P27 000 B.) P34 000 C.) P35 000 D.) P42 000
(40 000 + 45 000 + 7000) = 78 000 – 120 000 = P42 000
13.) AA Corporation was forced into bankruptcy and is in the process of liquidating assets and paying
claims. Unsecured claims will be paid at the rate of 30 cents on the peso. CC holds a note
receivable from AA for P90 000, collateralized by an asset with a book value of P60 000 and a
liquidation value of P30 000. The amount to be realized by CC on this note is:
A.) P48 000 C.) P60 000
B.) P90 000 D.) P30 000
30 00 + [30% x (90 000 – 30 000)] = P48 000
14.) OTG Co., filed a bankruptcy petition and liquidated its non-cash assets. OTG was paying forty
cents on the dollar for unsecured claims. GG Co., held a mortgage of P150 000 on land that was
sold for P110 000. The total amount of payment that GG should have received is calculated to be:
A.) P110 000 C.) P60 000
B.) P126 000 D.) P134 000
[110 000 + (150 000 – 110 000) X 40%] = P126 000
15.) Happy Corporation was forced into bankruptcy and is in the process of liquidating assets and
paying claims. Unsecured claims will be paid at the rate of thirty cents on the peso. Unhappy
holds a note receivable from Happy collateralized by an asset with a book value of P50 000 and a
liquidation of P25 000. The amount to be realized by Unhappy on this note is:
A.) P25 000 C.) P75 000
B.) P40 000 D.) P50 000
25 000 + [30% x (75 000 – 25 000)] = P40 000
16.) Splat Company filed a voluntary bankruptcy petition, and the statement of affairs reflected the
following amounts:
Assets Estimated Book Value Current Value
Assets pledged with
fully secured creditors P900 000 P1 10 000
Assets pledged
partially secured creditors 540 000 360 000
Free assets 1 260 000 960 000
P2 700 000 P2 430 000
Liabilities
P3 210 000
Assume that the assets are converted to cash at their estimated current values. What amount of
cash will be available to pay unsecured non-priority claims?
Ruby Company recently petitioned for bankruptcy and is now in the process of preparing a statement of
affairs. The carrying values and estimated fair values of the assets of Ruby Company are as follows:
P 363 000