The unsecured creditors of Dawn Corporation filed a petition under Chapter 7 of the bankruptcy act on July 1, 2011, to force Dawn into bankruptcy. The court order for relief was granted on July 10, at which time an interim trustee was appointed to supervise liquidation of the estate. A listing of assets and liabilities of Dawn Corporation as of July 10, 2011, along with estimated realizable values, is as follows:
| Book Values | Estimated Realizable Values |
Assets |
|
|
Cash | $80,000 | $80,000 |
Accounts receivable—net | 210,000 | 160,000 |
Inventories | 200,000 | 210,000 |
Equipment—net | 150,000 | 60,000 |
Land and buildings—net | 250,000 | 140,000 |
Intangible assets | 10,000 | — |
| $900,000 | $650,000 |
Accounts payable | $400,000 |
|
Note payable | 100,000 |
|
Wages payable (from June and July) | 24,000 |
|
Taxes payable | 76,000 |
|
Mortgage payable $200,000, plus $5,000 unpaid interest to July 10 | 205,000 |
|
Capital stock | 300,000 |
|
Retained earnings deficit | (205,000) |
|
| $900,000 |
|
ADDITIONAL INFORMATION
1. Accounts receivable are pledged as security for the note payable.
2. No more than $1,000 is owed to any employee.
3. Taxes payable is a priority item.
4. Inventory items include $50,000 acquired on July 5, 2011; the unpaid invoice is included in accounts payable.
5. The mortgage payable and interest are secured by the land and buildings.
6. Trustee fees and other costs of liquidating the estate are expected to be $11,000.
REQUIRED
1. Prepare a statement of affairs for Dawn Corporation on July 10, 2011.
2. Develop a schedule showing how available cash will be distributed to each class of claims, assuming that (a) the estimated realizable values are actually received and (b) the trustee and other fees of liquidating the estate are $11,000.
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