The following items were displayed in the statement of affairs for Lubbock Compa
ID: 2498268 • Letter: T
Question
The following items were displayed in the statement of affairs for Lubbock Company:
Fully secured liabilities $90,000
Partially secured liabilities 12,000
Unsecured liabilities without priority 220,000
Unsecured liabilities with priority 8,000
Assets pledged for fully secured assets 120,000
Assets pledged for partially secured assets 6,000
Free Assets 120,000
Based on the foregoing information prepare a working paper showing the how the estimated amount received from the sale of assets will be distributed to the four classes of creditors
Explanation / Answer
Payment to four classes as under:
1) Fully secured liabilities $90000
2) Partially secured liabilities $12000
3) Unsecured liability with priorty $8000
4) Unsecured liabilities without priority $136000
Explanation as under:
1) Fully secured liabilities $90000
A fully secured creditor has an obligation from an insolvent company but holds a collateral interest in assets that have a value in excess of the debt so from assets pledged for secured assets $120000. So $30000 is remained from secured assets.
2) Partially secured liabilities $12000
A partially secured creditor also has a collateral interest but the liability is larger than the anticipated proceeds from the realization of the attached assets. So from $30000, $12000 will be paid now remaining is $18000
3) Unsecured liability with priorty $8000
Now assets left is
Assets pledged for fully secured assets (120,000-90000-12000-8000)=$10000
Assets pledged for partially secured assets 6,000
Free Assets 120,000
4) Unsecured liabilities without priority $136000
So they will have loss of (22000-136000) $84000
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