Statement of Realization and Liquidation Comfort Mattress Corporation, a retaile

Question

Statement of Realization and Liquidation
Comfort Mattress Corporation, a retailer, decided to liquidate in the face of an extreme cash shortage. By agreement with creditors, a receiver was appointed to manage the liquidation. Upon appointment, the receiver found the company's financial condition to be as follows:

From March 17 through June 30, the following occurred:

1. Collected accounts receivable of $80,000; the remaining accounts are deemed to be uncollectible.
2. Held a ''going out of business sale.'' Sold inventory costing $310,000 for $298,000. Paid expenses of conducting the sale, amounting to $75,000.
3. Sold the remaining inventory to a liquidator for $60,000.
4. The receiver terminated the store's lease; the lease provides for a termination penalty of $25,000, which was accrued.
5. Sold the store fixtures at auction for a net of $40,000.
6. Accrued the receiver's fee of $50,000.
7. Paid the secured creditors to the extent of the realized value of their security.

Required

a. Prepare a statement of realization and liquidation as of June 30, 2016.

b. Compute the remaining cash and determine how it is disbursed, assuming no further expenses.

COMFORT MATTRESS CORPORATION Balance Sheet March 17, 2016 Cash $15,000 Accounts Payable $485,000 Accounts receivable 120,000 Loan payable (secured by inventory) 225,000 Inventory of merchandise 500,000 Notes payable (secured by fixtures) 60,000 Store fixtures, net 150,000 Stockholders' equity 15,000 Total assets $785,000 Total liabilities and equity $785,000

Explanation / Answer

COMFORT MATTRESS CORPORATION Statement of realization and liquidation as of June 30, 2016 Assets to be realised Assets Realised Accounts receivable 120,000 80000 Inventory of merchandise 500,000 358000 Store fixtures, net 150,000 40000 770,000 478,000 Loss on Realisation 292,000 Liabilities to be liquidated Liabilities Liquidated Accounts Payable 485000 0 Loan payable (secured by inventory) 225,000 225000 Notes payable (secured by fixtures) 60,000 40000 770000 265000 Liabilities not to be liquidated 505000 Lease termination penalty accrued 25000 Receiver fees accrued 50000 Total 872,000 Balance Cash available(Mar.17) 15000 Add: Accounts receivables collected 80000 Inventory sale(298000+60000) 358000 Store fixtures auction 40000 478000 Less: Payments for: Inventory sale 75000 Loan(secured creditor) 225000 Note(secured creditor) 40000 340000 Balance available (June 30) 153000 Less: Receiver fee 50000 Available cash for payment to unsecured creditors 103000 Disbursement among unsecured creditors Accounts payable 485000 485000/530000*103000= 94255 Balance Note payable 20000 20000/530000*103000= 3887 Lease termination fee 25000 25000/530000*103000= 4858 530000 103000

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