Question

= + + Assets $12,000 $16,000 = Allen White Liabilities $8,280 $3,840 + Common Stock $2,520 $8,800 + + Retained Earnings $ 1,200 $3,360 +

Answer 1

Solution

C)

Loss incurred by Allen = $5,100

Remaining Assets = $12,000- $5,100 = $6,900

Since the amount is not able to cover the company’s total obligation to creditors of $8,280, Creditors will be paid the $6,900 realized from the sale, while investors will go home empty handed since Creditors are considered first in the event that a company liquidates or becomes bankrupt.

Amount Paid to creditors = $ 6,900

Amount Paid to investors = $ 0

D)

Loss incurred by White = $5,100

Remaining Assets = $16,000-$5,100

                             = $10,900

Creditors will be paid first an amount of $3,840 then investors will be paid the remaining $7,060.

Amount Paid to creditors = $ 6,900

Amount Paid to investors = $ 7,060

Please give me thumbs up if you like my answer :-)