Kimber Co. is in the process of liquidating and going out of business. The firm's accountant has

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Kimber Co. is in the process of liquidating and going out of business. The firm's accountant has provided the following balance sheet and additional information:


Kimber Co. is in the process of liquidating and going


It is estimated that all but 12% of the accounts receivable can be collected, and that the merchandise inventory can be disposed of in a liquidation sale for 85% of its cost. Buildings and equipment can be sold at $40,000 above book value (the difference between original cost and accumulated depreciation shown on the balance sheet), and the land can be sold at its current appraisal value of $65,000. In addition to the liabilities included in the balance sheet, $2,400 is owed to employees for their work since the last pay period, and interest of $5,250 has accrued on notes payable and long-term debt.

Required:
a. Calculate the amount of cash that will be available to the stockholders if the accounts receivable are collected, the other assets are sold as described, and all liabilities and other claims are paid in full.
b. Briefly explain why the amount of cash available to stockholders (computed in part a) is different from the amount of total owners' equity shown in the balancesheet.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due....
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Accounting What the Numbers Mean

ISBN: 978-0073527062

9th Edition

Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,

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