Question

The following balance sheet has been prepared by the accountant for Limestone Company as of June 3, 2017, the date on which the company is to file a voluntary petition of bankruptcy: $ LIMESTONE COMPANY Balance Sheet June 3, 2017 Assets Cash Accounts receivable (net) Inventory Land Buildings (net) Equipment (net) Total assets Liabilities and Equities Accounts payable Notes payable-current (secured by equipment) Notes payable-long term (secured by land and buildings) Common stock Retained earnings Total liabilities and equities 4,000 66,00 90,000 101,00 301,200 182.ee $ 744.800 $ 100,00 252,00 191,00 121,00 80,000 $ 744,00 Additional Information • If the company is liquidated, administrative expenses are estimated at $19.000. • The accounts payable figure includes $11,000 In wages earned by the company's 12 employees during May. No one earned more than $2,300. • Liabilities do not include taxes of $15,000 owed to the U.S. government. Company officials estimate that 35 percent of the accounts receivable will be collected in a liquidation and that the Inventory disposal will bring $81,000. The land and buildings will be sold together for approximately $312,000, the equipment should bring $131,000 at auction.

Answer 1

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				Available for
	Book			Unsecured
	Values		Assets	Creditors
		Pledged with Fully Secured Creditors:
	$   402,000	Land and buildings	$                                                                       312,000
		Less: Notes payable-long‑term	$                                                                    (191,000)	$              121,000
		Pledged with Partially Secured Creditors:
	$   182,000	Equipment	$                                                                       131,000
		Notes payable—current	$                                                                    (252,000)	$                         -
		Free Assets:
	$        4,000	Cash		$                  4,000
	$      66,000	Accounts receivable		$                23,100
	$      90,000	Inventory		$                81,000
		Total amount available to pay liabilities
		with priority and unsecured creditors		$              229,100
		Less: Liabilities with priority		$              (45,000)
				$              184,100
		Available for unsecured creditors		$              187,000
		Estimated deficiency	$210,000-$23,000	$                23,000
	$   744,000			$              210,000
				Unsecured—
	Book			Nonpriority
	Values	Liabilities and Stockholders' Equity		Liabilities
		Liabilities with Priority:
		Administrative expenses	$                                                                         19,000
	$      11,000	Salaries payable	$                                                                         11,000
		Taxes payable	$                                                                         15,000
		Total	$                                                                         45,000
		Fully Secured Creditors:
	$   191,000	Notes payable - long‑term	$                                                                       191,000
		Less: Land and buildings	$                                                                    (312,000)	$                         -
		Partially Secured Creditors:
	$   252,000	Notes payable current	$                                                                       252,000
		Less: Equipment	$                                                                    (131,000)	$              121,000
		Unsecured Creators:
	$      89,000	Accounts payable (other than salaries)		$                89,000
	$   201,000	Stockholders' equity		$                         -
	$   744,000			$              210,000