Question

1. A company entering liquidation has reported assets with a book value of $900,000 and a liquidation value of $650,000. It also has previously unreported customer lists with a fair value of $50,000. Estimated liquidation costs are $40,000. The company’s statement of net assets in liquidation reports total assets of:

a.            $660,000

b.            $900,000

c.             $700,000

d.            $650,000

2.          A company entering liquidation has reported assets with a book value of $900,000 and a liquidation value of $600,000, and previously unreported customer lists with a fair value of $50,000. During the next month, it sells assets for $200,000. Remaining assets have a fair value of $460,000. The company’s statement of changes in net assets in liquidation for the month reports a remeasurement gain or loss on assets of:

a.            $240,000 loss

b.            $60,000 gain

c.             $140,000 loss

d.            $10,000 gain

Answer 1

Ans 1

Gross Liquidation asset $ 650,000

Add: Unreported customer list $ 50,000

Total $ 700,000

Less: Liquidation costs $ 40,000

Net Liquidation assets $ 660,000

Therefore the correct answer is (a) - $ 660,000

Ans 2.

Liquidation value $ 600,000

Add: Unreported customer list $ 50,000

Total $ 650,000

Part assets realized $ 200,000

Balance value should be $ 450,000

However fair value of balance assets $ 460,000

Therefore, there is a net gain of $ 10,000

Correct answer is (d) $ 10,000 gain