Question

On June 1, 2021, Bland Corporation prepared a statement of financial position just prior to going out of business. The totals for the three main components showed the following: Assets (no cash) Liabilities Shareholders' equity $ 113,000 72,000 41,000

Answer 1

Balances immediately after sale
	Cash received for the assets	Assets	-	Liabilities	=	Shareholders equity
CASE A	$      113,000	$      113,000	-	$      72,000	=	$                     41,000
CASE B	$         98,000	$         98,000	-	$      72,000	=	$                     26,000
CASE C	$      128,000	$      128,000	-	$      72,000	=	$                     56,000
CASE D*	$         41,500	$         72,000	-	$      72,000	=	$                             -

	To Creditors	To shareholders	Total
CASE A	$   72,000	$      41,000	$       113,000
CASE B	$   72,000	$      26,000	$         98,000
CASE C	$   72,000	$      56,000	$       128,000
CASE D	$   41,500	$               -	$         41,500

*For Case D -

Loss on sale of asset = $41,500 - $113,000 = $71,500

Loss to the extent of shareholders basis will be adjusted from basis = $41,000

Remaining loss $30,500 will be shown in asset as a negative profit & loss balance.

So Asset balance will be = Cash + loss = $41,500 + $30,500 = $72,000.

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