Question

The Walston Company is to be liquidated and has the following liabilities: $ 12,000 160,000 105,000 Income taxes Notes payable (secured by land) Accounts payable Salaries payable (evenly divided between two employees) Bonds payable Administrative expenses for liquidation 9,000 90,000 40,000 The company has the following assets: Current assets Land Buildings and equipment Book Value $ 100,000 120,000 120,000 Fair Value $ 55,000 110,000 153,000 How much money will the holders of the notes payable collect following liquidatior Total amount collected

Answer 1

Answer with working notes is given below

$110,000 Total amount collected Notes payable secured by Land Notes payable unsecured Total amount collected $30,000 As per working below $140,000 Working notes: $55,000 $153,000 $208,000 Unsecured assets - realisable value Current assets Building and equipment Total realisable value Less: Liabilities to be paid Income tax Salaries payable Administrative expense for liquidation Total liabilities to be paid Balance on unsecured assets $12,000 $9,000 $40,000 $61,000 $147,000 Unsecured Liabilities Notes payable -As per WN below Accounts payable Bonds payable Total unsecured liabilities Notes payable to be paid proportionately $50,000 $105,000 $90,000 $245,000 $30,000 ($147,000/$245,000) *$50,000 Unsecured notes payable Sale value of Land Less: Notes payable secured by land Balance unsecured $110,000 $160,000 $50,000