Oregon Corporation has filed a voluntary petition to reorganize under Chapter 11
ID: 2454081 • Letter: O
Question
Oregon Corporation has filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Reform Act. Its creditors are considering an attempt to force liquidation. The company currently holds cash of $8,000 and accounts receivable of $27,000. In addition, the company owns four plots of land. The first two (labeled A and B) cost $10,000 each. Plots C and D cost the company $22,000 and $27,000, respectively. A mortgage lien is attached to each parcel of land as security for four different notes payable of $17,000 each. Presently, the land can be sold for the following:
Plot A $18,000
Plot B $13,000
Plot C $16,000
Plot D $31,000
Another $21,000 note payable is unsecured. Accounts payable at this time total $36,000. Of this amount, $14,000 is salary owed to the company’s workers. No employee is due more than $3,600. The company expects to collect $14,000 from the accounts receivable if liquidation becomes necessary. Administrative expenses required for liquidation are anticipated to be $20,120.
Requirement: Prepare a statement of financial affairs for Oregon Corporation. (Be sure to list assets in the order of liquidity and unsecured liabilities in the order of priority. Amounts to be deducted should be indicated with minus sign.
Explanation / Answer
Statement of financial affairs for Oregon Corporation
Total Amount receivable at timeof liquidation
Particulars Book value Amount realised
Cash = 8000 8000
Account receivable = 27000 14000
Plot A= 10000 18000
Plot B= 10000 13000
Plot C= 22000 16000
Plot D= 27000 31000
Total 104000 100000
Total amount receivable at time of liquidation = 100000
Amount apyable
first preference = liquidation Expense = 20120
second preference = Workers salary = 14000
Third preference = secured creditors = 65880 (17000*4 - 2120)
Forth prerence = unsecured creditors = 0
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