The Walston Company is to be liquidated and has the following liabilities: Incom

ID: 2445097 • Letter: T

Question

The Walston Company is to be liquidated and has the following liabilities:

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$8,000

Notes payable (secured by land) . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000

. Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85,000

Salaries payable (evenly divided between two employees) . . . . . . . 6,000

. Bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . .............. 70,000

Administrative expenses for liquidation . . . . . . . . . . . . . . . . . . . . .. 20,000

The company has the following assets:

Book Value Fair Value

Current assets . . . . . . . . . . . . . . . . . . . . . $80,000 35,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 100,000 100,000

Buildings and equipment . . . . . . . . . . . . . . . 100,000 110,000

How much money will the holders of the notes payable collect following liquidation?

TOTAL FREE ASSETS => CURRENT ASSETS + BUILDINGS & EQUIPMENT

=> 35000 + 110000

=> $ 145000

PRIORITY OF PAYMENTS => ADMINISTRATIVE EXPENSES +SALARY PAYABLE AND INCOME TAXES

=> 20000 +6000 + 8000 => 34000

REMAINING AMOUNT => 145000- 34000 => 111000

VALU EOF LIABILITIES REMAINE D FRO PAYEMNT => NOTES PAYABLE(IN EXCESS OF VALUE OF SECURITY) + ACCOUNTS PAYABLE (UNSECURED ) AND BONDS PAYABLE

= > 20000+85000+70000 => 175000

PERCENTAGE OF UNSECURED LAIBILITIES TO BE PAID => 111000 / 175000 => 63%

COLLECTION OF NOTES PAYABLE WILL BE => 100000 + (63% OF 20000)

=> 100000 + 12600 => $112600

Holders of the notes payable collect following liquidation => $ 112600

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