On March 1, 2020, Farmworth Company is entering liquidation. The book of its assets total $ 400,000, including $10,000 in cash, and the book value of its liabilities total $360,000. Additional information is as follows: 1. Expected proceeds from reported assets other than cash are :

• Receivables, $30,000
• Inventory, $ 70,000
• Plant and equipment, $ 175,000

2. Expected costs of liquidation assets are $25,000. Required.

a. Calculate the cumulative effect the adjustment to farmworth's net assets due to the adoption of the liquidation basis of according. Using a negative sign with your answer if the cumulative effect reduces net assets.

b. Prepare a statement of net assets in liquidation as of March 1, 2020. Use a negative sign with your net assets answer, if appropriate.

Transcribed Image Text:

Assets Cash Receivables Inventory Plant and equipment Total assets Liabilities Reported liabilities Accrued liquidation cost Total liabilities Net assets Farmworth Company Statement of Net Assets in Liquidation March 1, 2020 S S $ $ S S $ S $ 50 $ Assets Cash Receivables Inventory Plant and equipment Total assets Liabilities Reported liabilities Accrued liquidation cost Total liabilities Net assets Farmworth Company Statement of Net Assets in Liquidation March 1, 2020 S S $ $ S S $ S $ 50 $

Answer rating: 100% (QA)

1 Book Value is the net asset value of a company at a given point of timebased on histo... View the full answer