Problem 1

The Global corporation is undergoing liquidation and has the following

condensed statement of financial position as of January 1, 2020

ASSETS LIABILITIES AND SHE

Cash 114,200 Salaries payable 50,000
Receivables (net) 340,800 Accounts payable 108,500
Inventory 80,000 Mortgage payable 400,000
Prepaid expenses 2,500 Loan Payable 220,000
Building (net) 345,000 Note payable 80,000
Goodwill 55,000 Ordinary shares 120,000
Deficit -41,000
TOTAL ASSETS 937,500 TOTAL LIAB &SHE 937,500

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 to P4,000.

Problem 2
CLOSURE CORPORATION
Statement of Financial Position
September 30, 2020

Assets
Cash 32,100
Notes receivable 120,000
Accounts receivable 261,000
Inventory 240,000
Prepaid insurance 3,000
Furniture and fixtures 24,000
Delivery equipment 108,000
Goodwill 150,000
TOTAL ASSETS 938,100

Liabilities and SHE

Salaries and wages payable 2,400
Accrued interest on notes payable 4,800
Notes payable 300,000
Accounts payable 408,000
Ordinary shares 300,000
Share premium 30,000
Deficit -107,000
 TOTAL LIAB AND SHE 938,200

A trustee appointed on September 30 who obtain the following data:

It is estimated that assets will realize the following accounts:
Notes receivable 3/4 of recorded amount
Accounts receivable 195,000
Inventory 75% of book value
Furniture and fixtures 3,000 more than the CV
Delivery equipment 84,000

40% of notes payable with related interest amounting to the 1/4 of the total
accrued interest are secured by merchandise inventory with a book value of
P180,000

Notes payble of P85,000 on which interest of 2,700 is accrued are secured by the
delivery equipment

Liability to the trustee is 40,000

accrued taxes 12,000

Requirements:
Compute for the following
1. total free assets
2. Net free assets
3. Estimated deficiency to unsecured creditors
4. Estimated net gain/loss on realization of assets
5. the amount to be paid to partially secured creditors

Problem 3

FVG Corporation has been undergoing liqidation since January 1. As of June 30,
its condensed statement of realization and liquidation is presented below:

Assets realized 525,000

Interest on investment 2,625
Purchases 26,250
Assets Acquired 87,500
Liabilities assumed 26,250
Payment of expenses of truste 131,250
Liabilities to be liquidated 1,137,500
Sales on account 87,500
Assets not realized 735,000
Liabilities not liquidated 557,375
Sales for cash 437,500
Assets to be realized 1,662,500
Liabilities liquidated 612,500
 Net gain (loss) on realization and liquidation is:

Problem 4
The following are the data before liquidating

Cash 25,000 Accounts payable 325,000

Short term investment 75,000 Capital stock 250,000
Accounts receivable 150,000 Deficit -75,000
Inventory 250,000
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

Cash receipts
Sales of merchandise 125,000
Collections of accounts receivable 57,500
Sales of marketable securities 92,500
interest on short term investment 750

Cash disbursement
Payment of accounts payable 175,000
Payment of expenses of trustee 37,500

At the end of the year, assets remaining to be realized and liabilities to be

liquidated were as follows:

AR beg 150,000
sales on account 25,000
Less: Collection 57,500
Uncollectible 7,500
AR end 110,000

Inventory beg 250,000

Purchases 7,500
Less: CGS 157,500
Inventory end 100,000

AP beg 325,000
Purchases on account 7,500
Payment in account 175,000
AP end 157,500

Accrued expenses ending balance 1,750

Net loss/gain on realization and liquidation is ______

1st Method - Long method

Free Assets Unsecured Liabilities

AR 8,160 MP 44,000 Mortgage payable 400,000
15,000 A/P 48,500 Interest 4,000
Cash 114,200 NP 80,000 Building (CV 345,000)
Invty 53,000 Total unsecure 172,500 Unsecured liability
TOTAL free 190,360
AP 108,500
Secured 60,000
Liquidation 9,500 Deficiency 45,640 48,500
Salaries 50,000 AR (CV 85,200)
Taxes 4,000 Expected recovery % Free Asset
TOTAL Net 126,860 73.54%
1 = 0.7354 LP
AR 255,600
Free Asset

FREE ASSETS UNSECURED LIABILITIES

Invty 58,800 NP 99,600
Cash 32,100 AP 408,000 Fully secured liabilities
NR 90,000 Total unsecure 507,600
AR 195,000
F&F 27,000
Total Free 402,900 Est Deficiency
159,100
40,000
2,400 Est Recovery %
12,000 68.66%
Total Net f 348,500

-150,000 Goodwill
CV RV -3,000 Ins
NR 120,000 90,000 - 30,000
AR 261,000 195,000 - 66,000
Invty 240,000 180,000 - 60,000
F&F 24,000 27,000 3,000
Equip 108,000 84,000 - 24,000
576,000 -330,000 Net Loss
Notes paya 300,000
Notes payable 300,000
40% NP 120,000 Interest 4,800
Interest 1,200
Inv @RV 135,000 121,200
Free Asset 13,800 84,000
Unsecured 99,600
NP 85,000
Interest 2,700
Equipment 84,000 84,000
Unsecured- 3,700 2,540
86,540

1. Asset to be realized 1. Asset realized

2. Increased in asset 2. Asset not realized
Example:
3. Liabilities liquidated 3. Liabilities to be liquidated A/R
4. Liabilities not liquidated 4. Increase in Liabilities

5. Supplemental charges 5. Supplemental credit CGS

STATEMENT OF REALIZATION AND LIQUIDATION
1,662,500 525,000 Asset realized
87,500 735,000 Cash

Exp
612,500 1,137,500
 557,375 26,250
26,250 2,625 Int
131,250 87,500
437,500
3,077,375 2,951,375
126,000 LOSS
3,077,375

1. Asset to be realized 1. Asset realized

2. Increased in asset 2. Asset not realized

3. Liabilities liquidated 3. Liabilities to be liquidated

4. Liabilities not liquidated 4. Increase in Liabilities

5. Supplemental charges 5. Supplemental credit

Revenue/Gain
1 Investment 75,000 1 Collection 57,500
A/R 150,000 Investment 92,500
Invntory 250,000 BDE 7,500
Invty 157,500
2 Sales/A/R 25,000 2 A/R 110,000
Inty 7,500 Invty 100,000 Expenses

3 Payment A/P 175,000 3 A/p 325,000

4 A/P 157,500 4 Invty (A/P) 7,500

Accrued Exp 1,750 Accrued Ex 1,750
5 Trustee 37,500 5 Sales 25,000
BDE 7,500 Cash sales 125,000
CGS 157,500 Deficit Beg
Accrued Exp 1,750 Interest 750 Net loss
1,046,000 1,010,000 Deficit, end
36,000
1,046,000
 Peso % 2nd Method
Fully secured
AP 60,000 100%
404,000 LP 220,000 AR
360,000
44,000 Partially secured liab Invty
MP 404,00 360,000 Prep Exp
44,000 32,358.49 392,358 97.12% Build
60,000 GW
Unsecured w/ priority
68,160 Liquidation 9,500 Estimated
-8,160 Salaries 50,000 Est. Loss
Taxes 4,000 100% Est. Gain
220,000
235,000 Unsecured w/out priority
-15,000 AP 35,668 Estimated deficiency
NP 58,834 94,502 73.54%

830,360
830,360
0
 xx
Sales xx

xx
A/P xx

xx
Sales xx
xx
Cash xx
Revenue/Gain ASSET LIABILITIES
Sales 25,000 Cash 88,250 A/P 157,500
Cash sales 125,000 A/r 110,000 Accrued Ex 1,750
Interest 750 Invty 100,000 EQUITY
ST Investm 17,500 168,250 Capital sto 250,000
298,250 Deficit,end -111,000

trustee 37,500
BDE 7,500
CGS 157,500 ASSUMPTION:
Accrued 1,750 204,250 Next year:
A/R 10,000 collected
-36,000 100,000 write-off
Invty 30,000 sold

Deficit Beg -75,000

-36,000 ASSET LIABILITIES
Deficit, end -111,000 Cash 128,250 A/P 157,500
A/r 0 Accrued Ex 1,750
Invty 0 EQUITY
Capital sto 250,000
128,250 Deficit,end -281,000

PAID UNPAID
AP 126,841 30,659 AP
Accrued exp 1,409 341 Accrued
250,000
 -281,000
128,250 -

A/P 30,659
Acc Exp 341
Capital Stoc 250,000
Deficit 281,000
281,000 281,000 -
2nd Method 3rd Method
Estimated GL on SHE Liabilities (Recorded + unrecorded)
Unrecorded Asset/Liab
asset realization Assets @RV
-17,040 -4,000 120,000 Estimated deficiency
-20,600 -9,500 -41,000
-27,000 -4,000
-2,500 Loss -17,500 79,000 CR. Gain
15,000
-55,000

-107,140
-122,140
15,000

Estimated deficiency -45,640

 159,250

139,000
298,250

159,250

-31,000
128,250

126,841
1,409
Cash 128,250
+ unrecorded) 876,000
830,360
45,640