Question

Deficiency to Unsecured Creditors Consider the following information for Evans, Inc. when the company entered bankruptcy proceedings: Account Balance per Books Dr (Cr) $31,700 646,800 Cash 320,000 10,600 750,000 123,500 Accounts receivable Inventory Prepaid expenses Buildings, net Equipment, net Goodwill Wages payable Taxes payable Accounts payable Notes payable 88,000 (77,300) (30,900) (967,300) (205,400) Common stock (1,200,000) 510,300 Retained earnings-deficit Total $0

Inventory with a book value of $240,000 and realizable value of $175,000 is security for notes payable of $145,000. The equipment secures the remaining notes payable. Expected realizable values of the assets are:

Answer 1

B $175,000 $145,000 $30,000 $31,700 $300,000 $25,000 $250,000 $606,700 Α Assets pledged to fully-secured creditors Inventory Less: Liabilities to fully-secured creditors Notes payable Available as free assets *Unpledged assets Cash Accounts receivable Inventory (200000-175000) Buildings Total free assets * Less: Unsecured liabilities with priority Wages payable Taxes payable - Net free assets - Liabilities to partially-secured creditors *Notes payable (205400-145000) Less: Assets pledged to partially-secured creditors Unsecured portion Unsecured liabilities Total unsecured liabilities Estimated deficiency (987700-528500) $636,700 Va5 $77,300 $30,900 -$108,200 $528,500 $60,400 -$40,000 $20,400 $967,300 $987,700 $459,200