Question

Saved Help 2 A company preparing for a Chapter 7 liquidation has listed the following liabilities: 6.66 points Note payable A of $92,000 secured by land having a book value of $51,000 and a fair value of $71,000. • Note payable B of $122,000 secured by a building having a $61,000 book value and a $41,000 fair value. • Note payable C of $61,000, unsecured. Administrative expenses payable of $21,000. Accounts payable of $121,000. Income taxes payable of $31,000. Skipped eBook Print The company also has these other assets: • Cash of $11,000. Inventory of $102,000 but with a net realizable value of $61,000. Equipment of $92,000 but with a net realizable value of $51,000. . . Based on this information, how much will each of the company's liabilities be paid at liquidation? Amount Payment on note payable A Payment on note payable B Payment on note payable C Payment on administrative expenses Payment on accounts payable Payment on income taxes payable Me Graw Hill < Prey 2 of 3 Next >

Answer 1

Answer to image 1

Free Assets
Cash	11,000.00
Inventory	61,000.00
Equipment	51,000.00
Total Free Assets		123,000.00
Less: Liabilities With Priority
Administrative Expenses	21,000.00
Income Tax Payable	31,000.00
Total Liabilities With Priority		-52,000.00
Free Assets after Payment of Liabilities with Priority		71,000.00

Unsecured Liabilities
In excess of Value of security
Notes Payable A ($92000 - 71,000)	21,000.00
Notes Payable B ($122000 - 41,000)	81,000.00
Uunsecured Creditors
Notes Payable C	61,000.00
Accounts Payable	121,000.00
Total Unsecured Liabilities	284,000.00
Percentage of Unsecured Liabilities To Be Paid = $71,000 / 284,000 = 25%

Amount Paid at the Time of Liquidation:
Note Payable A = $71,000 + (21,000 X 25%)	= 76,250.00
Note Payable B = $41,000 + (81,000 X 25%)	= 61,250.00
Note Payable C = $61,000 X 25%	= 15,250.00
Administrative Expenses	= 21,000.00
Accounts Payable = $121,000 X 25%	= 30,250.00
Income Tax Payable	= 31,000.00

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