The Walston Company is to be liquidated and has the following liabilities Income
ID: 2413111 • Letter: T
Question
The Walston Company is to be liquidated and has the following liabilities Income taxes Notes payable (secured by land) $9,4ee 144,000 97,000 Accounts payable Salaries payable (evenly divided between two employees) Bonds payable Administrative expenses for liquidation 18,000 82,000 32,000 The company has the following assets: Book Value Fair Value Current assets Land Buildings and equipment S 92,000 $ 47,000 112,000102,000 112,000145,000 How much money will the holders of the notes payable collect following liquidation? otal amount collected wExplanation / Answer
Total free assets available for distribution = Fair value of Current assets + Fair value of Buildings and equipments
= 47000 + 145000 = 192000
Fair value of land is offset by secured notes payable and now value to the extent of 42000 (144000 - 102000) of notes payable is unsecured.
Following shall be paid first in the following sequence:
Administrative expenses for liquidation = 32000
Income taxes = 9400
Salaries payable (taken as preferential creditor) = 18000
Total free assets available after distributions to above = 192000 - 32000 - 9400 - 18000 = 132600
Total unsecured creditors available:
Notes payable (unsecured) = 42000
Accounts payable = 97000
Bonds payable = 82000
Total value of unsecured creditors = 42000+97000+82000 = 221000
Proportion of notes payable in total unsecured creditors = (42000/221000)*100 = 19%
Payment made to notes payable (unsecured) = 132600*19% = 25194
Total money the holders of the notes payable collect following liquidation = 102000 + 25194 = 127194
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.