AFAR Corporate Liquidation
AFAR Corporate Liquidation
AFAR Corporate Liquidation
Corporate Liquidation
The bonds payable is secured by the PPE having book value of P345,000 and a realizable
value of P360,000. Of the accounts payable, P60,000 is secured by 25% of the receivables
which is 80% collectible. The balance in the book value of the receivables which has a
realizable value of P235,000 is used to secure the bank loan payable. The inventory has a
realizable value of P53,000. In addition to the recorded liabilities are accrued interest on
bonds payable amounting to P4,000, trustees’ expenses of P9,500 and taxes of P4,000.
2. The following data are provided by Martin Corporation which is undergoing liquidation:
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ADVANCED FINANCIAL ACCOUNTING AND REPORTING
4. On October 31, 2022, Green Corporation’s trustee prepares a statement of affairs with the
following information:
P77,000 cash will be received by the unsecured creditors whose claims total
P140,000
Mr. Army, a maintenance staff of the company, has a claim of P2,625
Green issued to Sage Company a 1-year note of P17,500 on January 1, 2022.
Nothing has been pledged to this note.
Nordic Company holds a note of P26,250 on which interest pf P787.50 is accrued.
Equipment with book value of P24,500 has been pledged to this note. Market value
of the equipment is P28,875.
Hunter received a 10% note of P21,000 from Green on February 1, 2022, pledged
with equipment with a fair market value of P17,500.
Additional information:
a. 15% of the accounts receivables is estimated to be uncollectible
b. The inventory is estimated to be sold for P340,000 excluding selling costs of P50,000
c. The investments, with realizable value of P110,000, have been pledged as security for
the notes
d. the machinery and equipment have a realizable value of P53,900
e. The mortgage payable is secured with the land and building with a realizable value of
P500,000
f. Unpaid taxes payable amount to P16,400
g. Accrued interest on the mortgage total P10,000
h. Trustee fees and other liquidating costs are estimated to be P60,000
i. Patents previously written off have a realizable value of P10,000
Requirement:
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ADVANCED FINANCIAL ACCOUNTING AND REPORTING
6. Optimum Corporation is in bankruptcy and is being liquidated. The trustee has converted all
assets into P120,000 cash and has prepared the following list of approved claims:
7. The following data were taken from the statement of affairs for Florida Company:
8. The following data were taken from the statement of realization and liquidation of Pistachio
Corporation for the quarter ended June 30, 2022:
The ending capital balances of capital stock and retained earnings are P648,750 and P178,500,
respectively. A net loss of P226,500 was recorded for the period.
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ADVANCED FINANCIAL ACCOUNTING AND REPORTING
9. Twins Corporation is underdoing liquidation. On February 1, 2022, the following data were
available:
Cash 112,000
Accounts receivable 80,000
Merchandise inventory 160,000
Investment 26,400
Land 100,000
Building 60,000
Machinery and equipment 48,000
Accounts payable 288,000
Notes payable 244,000
Loan payable 180,000
Salaries payable 40,000
Taxes payable 8,000
Estate deficit (173,600)
During the six-month period ending July 31,2022, the trustee sold the investment for P26,000,
realized P84,000 for the accounts receivable, sold the merchandise for P152,000, and paid off
P26,000 of the bank loan and all liabilities with priority as well as administration expenses
amounting to P7,440.
Required:
a. Net loss or loss on realization
b. Cash balance on July 31, 2022
10. Mountain Company enters into bankruptcy proceedings on April 30, 2022. Its balance sheet
on that date shows:
None of the liabilities are secured. The following transactions occurred between April 30
and August 31:
Merchandise inventory with a book value of P45,000 were sold for P30,000.
Equipment with a book value of P40,000 was sold for P25,000
Salaries and administrative expenses of P10,000 were accrued
An initial payment of 30 cents per peso of indebtedness was paid to
creditors
Required:
What is the loss on realization?
What is the net loss?
What is the ending balance of cash?
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