Question

The following balance sheet has been prepared by the accountant for Limestone Company as of June 3, 2020, the date on which the company is to file a voluntary petition of bankruptcy:

LIMESTONE COMPANY Balance Sheet June 3, 2020
Assets
Cash	$	12,000
Accounts receivable (net)		74,000
Inventory		106,000
Land		109,000
Buildings (net)		309,000
Equipment (net)		198,000
Total assets	$	808,000
Liabilities and Equities
Accounts payable	$	116,000
Notes payable—current (secured by equipment)		268,000
Notes payable—long-term (secured by land and buildings)		199,000
Common stock		129,000
Retained earnings		96,000
Total liabilities and equities	$	808,000

Additional Information

• If the company is liquidated, administrative expenses are estimated at $27,000.
• The accounts payable figure includes $19,000 in wages earned by the company's 12 employees during May. No one earned more than $3,100.
• Liabilities do not include taxes of $23,000 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 $89,000. The land and buildings will be sold together for approximately $328,000; the equipment should bring $139,000 at auction.

Prepare a statement of financial affairs for Limestone Company as of June 3, 2020.

LIMESTONE COMPANY Statement of Financial Affairs June 3, 2020 Book Values Assets Available for Unsecured Creditors Pledged with Fully Secured Creditors: Pledged with Partially Secured Creditors: Free Assets: Total amount available to pay liabilities with priority and unsecured creditors

Answer 1

Limestone Company

                                                                                Statement of Affairs

                                                                                As on June 3,2020

Book Values	Assets	Amount	Available for Unsecured Creditors
	Pledged with fully secured creditors
418000 (109000+309000)	Land and Buildings	328000
	Less: Notes payable secured by land and Building	199000	129000
	Pledged with partially secured creditors
198000	Equipment	139000
	Less: Notes payable secured by equipment	268000
	Free Assets
12000	Cash		12000
74000	Accounts Receivable	74000 * 35 %	26,250
106000	Inventory		106000
	Total assets available to pay liabilities with priority and unsecured creditors		273,250
	Less: Liabilities with priority (see below)		69000
	Available for unsecured creditors		204,250
	Estimated deficiency		90,750
808000	TOTAL		295000

Notes:

· After total assets column above, we move to prepare liabilities and stockholders’ equity where we have amount of liabilities with priority.

· Estimated deficiency is the difference between total figure derived from liabilities and stockholders’ equity and the amount available for unsecured creditors

Book Values	Liabilities and Stockholders' equity	Amount	Unsecured non priority liabilities
	Liabilities with priority
	Administrative expenses	27000
19000	Salaries Payable	19000
	Taxes Payable	23000
	Total Liabilities with priority	69,000	69,000
	Fully secured creditors
199,000	Notes Payable- long term (land and building)	199,000
	Less: land and building	328,000	-
	Partially secured creditors
268,000	Notes payable- current	268,000
	Less: Equipment	139,000	129000
	Unsecured creditors
97,000	Accounts Payable (other than salaries)	116000-19000	97,000
225000 (129+96)	Stockholders equity
808,000	TOTAL		295,000