The balance sheet of Sco appeared as follows on March 1, 2011, when an interim trustee was appointed by the U.S. trustee to assume control of Sco’s estate in a Chapter 7 case.
Assets | Liabilities and Stockholders’ Equity | ||
Cash | $4,000 | Accounts payable | $50,000 |
Accounts receivable—net | 8,000 | Note payable—unsecured | 40,000 |
Inventories | 36,000 | Revenue received in advance | 1,000 |
Land | 20,000 | Wages payable | 3,000 |
Buildings—net | 100,000 | Mortgage payable | 80,000 |
Intangible assets | 26,000 | Capital stock | 40,000 |
|
| Retained earnings deficit | (20,000) |
Assets | $194,000 | Liabilities and equity | $194,000 |
ADDITIONAL INFORMATION
1. Creditors failed to elect a trustee; accordingly, the interim trustee became trustee for the case.
2. The land and buildings are pledged as security for the mortgage payable.
3. In January 2011, Sco received $1,000 from a customer as a payment in advance for merchandise that is no longer marketed.
4. Activities of the trustee during March are summarized as follows:
a. $7,200 is collected on the receivables, and the balance is determined to be uncollectible.
b. All inventories are sold for $19,400.
c. Land and buildings bring a total of $90,000.
d. Nothing is realized from the intangible assets.
e. Administrative expenses of $8,200 are incurred by the trustee.
REQUIRED
1. Prepare a separate set of books for the trustee to assume possession of the estate and convert its assets into cash.
2. Prepare financial statements on March 31 for Sco in trusteeship (balance sheet, cash receipts and disbursements, and changes in estate equity).
3. Prepare journal entries on the trustee’s books to distribute available cash to creditors and close the case.
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