Problem 21-5 presents the balance sheet of St. John Corporation as of year-end 2015. Assume that the company is not able to service its debts and is unable to secure any significant restructuring arrangements from its primary lenders. As a result, St. John has decided to liquidate the corporation and has submitted a plan for liquidation. The plan has received all necessary approvals, and the liabilities affected by the plan are described as follows:
Accounts payable: Of these accounts, $400,000 is fully secured by claims against inventory with a book value of $430,000. The inventory was completed at an additional cost of $25,000, it was sold for $480,000, and the secured payables were paid. Another $320,000 of the payables is secured by the remaining inventory which is estimated to have a net realizable value of $200,000. The balance of the payables is unsecured.
Note payable —officer: This note is secured by the investment in Sky Industries which has a net realizable value of $320,000.
Bank A note payable: This note is secured by all of the equipment and the patent. Equipment with a book value of $800,000 has been sold for $700,000 by a broker who was paid a fee of $10,000. It is estimated that the balance of the equipment will have a net realizable value of $400,000. The patent was sold to an officer of the corporation for $250,000. Net proceeds from the collateral were paid to Bank A.
Bank B note payable: This note is secured by the development land. The land consists of two separate parcels with book values of $400,000 and $300,000. The $300,000 parcel was sold for $360,000 and it is estimated that the remaining parcel will have a net realizable value of $500,000.
Mortgage payable: This mortgage is secured by the manufacturing plant and other current assets with a book value of $130,000. The plant is currently listed for sale with an asking price of $1,800,000. Realistically, it is estimated that the plant could sell for $1,500,000 before commissions of $90,000. The other current assets securing the mortgage were sold for $100,000.
Other liabilities: $90,000 of these liabilities is secured by all receivables of the company. Receivables with a book value of $150,000 have been collected, and an additional $40,000 of allowance for uncollectible accounts has been established on the balance of the accounts.
The $90,000 of other liabilities was paid. Of the remaining other liabilities, $95,000 is unsecured without priority, and the balance is unsecured with priority. Since year-end, $20,000 of the unsecured liabilities with priority has been paid out of available assets. Since year-end 2016, additional assets with a net realizable value of $15,000 have been discovered, and administrative/legal expenses of $20,000 in connection with the liquidation have been incurred of which half have been paid.
Assuming that all of the above activity occurred within the first six months of 2016, prepare a statement of realization and liquidation to reflect the above activity and information.