Question

Statement of Realization and Liquidation Dong Company declares bankruptcy and the appointed trustee begins liquidation. Here is Dong's balance sheet as it enters liquidation. Assets Cash Receivables Inventories Buildings and equipment Total assets $25,000 80,000 175,000 300,000 $580,000 Liabilities and equity Accounts payable Wages and taxes payable Loans payable Equity Total liabilities and equity $200,000 50,000 350,000 (20,000) $580,000 None of the liabilities are secured. Priority claims are within legal limits. The following transactions occur over the next six months: 1. Customers paid in full $40,000 of receivables. 2. Inventory with a book value of $100,000 was sold for $60,000. 3. Equipment with a book value of $80,000 was sold for $35,000. 4. Legal, accounting, and trustee fees total $45,000. 5. The trustee pays all priority claims.

Answer 1

Please note that Accounts Receivable equivalent to $ 40,000 only realized in full (with no loss on realization) and balance of $ 40,000 ($80,000-$40,000) not realized. Thus, please find attached images with necessary corrections in GREEN font.

Required Prepare a statement of realization and liquidation for the six-month period, and the receiver's balance sheet and statement of estate deficit as of the end of the six-month period. Dong Company Statement of Realization and Liquidation Assets to be realized: Assets realized: Accounts receivable $ 40,000 Accounts receivable 80,000 Inventories 175,000 Inventories 60,000 Buildings and equipment 300,000 $ Equipment 35,000 $ 555,000 135,000 Liabilities liquidated: Assets not realized: Wages and taxes payable Accounts receivable 40,000 50,000 Administrative fees 45,000 75,000 95,000 Inventories Buildings and equipment 220,000 335,000 Liabilities not liquidated: Liabilities to be liquidated: Accounts payable 200,000 Accounts payable Loans payable 350,000 550,000 200,000 Wages and taxes payable 50,000 Loan payable 350,000 600,000 Liabilities incurred: Administrative fees 45,000 85,000 Gains on realization Losses on realization 0 Combined total Combined total $ 1,200,000 1,200,000

Do not use negative signs with any of your answers below. Dong Company Statement of Realization and Liquidation Accounts payable $ Cash $ 65,000 200,000 40,000 Loan payable Accounts receivable 350,000 Inventories 75,000 Buildings & equipment -Estate Deficit Total assetsS 220,000 130,000 Total liabilities and equity $550,000 550.000 Do not use negative signs with any of your answers below. Dong Company Receiver's Statement of Estate Deficit This Loss of Realization 40,000+45,000 reflects in Detailed table of Statement of Realization and Liquidation Loss on realization of inventories $ 40,000 Loss on realization of equipment 45,000 Administrative expenses 45,000 This Estate Deficit of $ 130,000 Net change in estate deficit 130,000 reflects in the above table Estate deficit, beginning 20,000 Estate deficit, ending $ 150,000