Creditors of Jones Corporation are considering petitioning the courts to force t

Question

Creditors of Jones Corporation are considering petitioning the courts to force the company into Chapter 7 Bankruptcy. The following information has been determined. Adminsitrative expenses in connection with the liquidation are estimated to be $22,000. Indicate the amount of money that each class of creditors can anticipate receiving. Book Value NRV Cash $6,000 $6,000 A/R $32,000 $18,000 Inventory $45,000 $31,000 Supplies $3,000 $0 Investments $2,000 $8,000 Land $60,000 $72,000 Buildings $90,000 $68,000 Equipment $50,000 $35,000 N/P (Secured by Land) $65,000 N/P (Secured by Buildings) $78,000 Bonds Payabe (Secured by Equipment) $115,000 Accounts Receivable $70,000 Salaries Payable (two weeks salary for 3 pp) $6,000 Taxes Payable $10,000 Creditors of Jones Corporation are considering petitioning the courts to force the company into Chapter 7 Bankruptcy. The following information has been determined. Adminsitrative expenses in connection with the liquidation are estimated to be $22,000. Indicate the amount of money that each class of creditors can anticipate receiving. Book Value NRV Cash $6,000 $6,000 A/R $32,000 $18,000 Inventory $45,000 $31,000 Supplies $3,000 $0 Investments $2,000 $8,000 Land $60,000 $72,000 Buildings $90,000 $68,000 Equipment $50,000 $35,000 N/P (Secured by Land) $65,000 N/P (Secured by Buildings) $78,000 Bonds Payabe (Secured by Equipment) $115,000 Accounts Receivable $70,000 Salaries Payable (two weeks salary for 3 pp) $6,000 Taxes Payable $10,000

Explanation / Answer

in case of liquidation the order of payment will be

1) secured creditors

2) liquidation expense

3) unsecured creditors

Notes payable ssecured by land will be paid full to the exent of $65,000                      surplus cash $10,000

Notes payable secured by buidings will be paid upto $68,000

Bonds paayble secured by equipment will be paid $35,000

Asset realisation

Cash 18,000 + Account recievable 18,000 + inventory $31,000 + investment $8000 + Surplus from lane $10,000

= total                                                  = $73,000

less:liquidation expense                        $22,000

Amount to be distributed to

unsecured creditors                             $55,000

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