Question

A company going through a Chapter 7 bankruptcy has the following account balances: Cash Receivables (25% collectible) Inventory (worth $40,800) Land (worth $134,000) (secures note payable) Buildings (worth $190,000) (secures bonds payable) Salaries payable (4 workers owed equal amounts for last 2 weeks) Accounts payable Note payable (secured by land) Bonds payable (secured by building) Common stock Retained earnings 32, eee 52, 92, eee 110, eee 220, eee 11, eee 92, eee 120, eee 320, eee 120, eee (15e,eee) How much will be paid to each of the following? Salaries payable Accounts payable Note payable Bonds payable

Answer 1

Chapter 7 ($52,000*25%) 32000 13000 40800 14000 99800 ($134,000 - $120,000) Free assets Cash Receivable Inventory Land Total free assets Less: Liability with priority Salaries Payable Free assets available Unsecured Liabilities Accounts Payable Bonds Payable Unsecured Liabilities payable Percentage of Unsecured Liabilities 11000 88800 92000 130000 ($320,000-$190,000) 222000 ($92,000+$130000) 40% ($88,800/$222,000) Salaries Payable Accounts Payable Notes Payable Bonds Payable 11000 36800 ($92,000*40%) 130000 242000 ($190,000 + ($320,000-$190,000) *40%)