Question

The following balance sheet has been produced for Litz Corporation as of August 8, 2013, the date on which the company is to begin selling assets as part of a corporation liquidation:
LITZ CORPORATION
Balance Sheet
8-Aug-13
Assets
Cash .......................... $16,000
Accounts Receivable (net) ................ $82,000
Investments ....................... $32,000
Inventory (net realizable value is expected to approximate cost) . $69,000
Land ......................... $30,000
Buildings (net) ..................... $340,000
Equipment (net) ..................... $210,000
Total assets ...................... $779,000
Liabilities and Equities
Accounts Payable ................... $150,000
Notes payable-current (secured by inventory) ........ $132,000
Notes payable-long term (secured by land) and
buildings [valued at $300,000]) ............. $259,000
Common stock .................... $135,000
Retained earnings ................... $103,000
Total liabilities and equities ............... $779,000
The following events occur during the liquidation process:
The investments are sold for $39,000. The inventory is sold at auction for $48,000. The money derived from the inventory is applied against the current notes payable. Administrative expenses of $15,000 are incurred in connection with the liquidation. The land and buildings are sold for $315,000. The long-term notes payable are paid. The accountant determines that $34,000 of the accounts payable are liabilities with priority. The company's equipment is sold for $84,000. Accounts receivable of $34,000 is collected. The remainder of the receivables is considered uncollectable. The administrative expenses are paid.
A) Prepare a statement of realization and liquidation for the period just described.
B) What percentage of their claims should the unsecured creditors receive?


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  • CreatedSeptember 19, 2013
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