The balance sheet of Everlast Window Corporation at June 30, 2011, contains the following items:
Assets |
|
Cash | $40,000 |
Accounts receivable—net | 70,000 |
Inventories | 50,000 |
Land | 30,000 |
Building—net | 200,000 |
Machinery—net | 60,000 |
Goodwill | 50,000 |
| $500,000 |
Equities |
|
Accounts payable | $110,000 |
Wages payable | 60,000 |
Property taxes payable | 10,000 |
Mortgage payable | 150,000 |
Interest on mortgage payable | 15,000 |
Note payable—unsecured | 50,000 |
Interest payable—unsecured | 5,000 |
Capital stock | 200,000 |
Retained earnings deficit | (100,000) |
| $500,000 |
The company is in financial difficulty, and its stockholders and creditors have requested a statement of affairs for planning purposes. The following information is available:
1. The company estimates that $63,000 is the maximum amount collectible for the accounts receivable.
2. Except for 20 percent of the inventory items that are damaged and worth only $2,000, the cost of the other items is expected to be recovered in full.
3. The land and building have a combined appraisal value of $170,000 and are subject to the $150,000 mortgage and related accrued interest.
4. The appraised value of the machinery is $20,000.
5. Wages payable and property taxes payable are unsecured priority items that do not exceed any limitations of the bankruptcy act.
REQUIRED
1. Prepare a statement of affairs for Everlast Window Corporation as of June 30, 2011.
2. Compute the estimated settlement per dollar of unsecured liabilities.
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