Chapter 5

1. Cash to be paid per peso of unsecured liability

(156,000 / 240,000) P .65
Estimated Amount Still Gain (loss)
Book Value Current Value Available Realization
Assets Pledged w/ fully secured
180,000 creditors 150,000 ( 30,000)
Fully Secured Liabilities 60,000 90,000
Assets pledged w/ partially secured
148,000 creditors 104,000 ( 44,000)
Partially secured liabilities 120,000
16,000
140,000 Free Assets 80,000 80,000 ( 60,000)
Total 170,000 (134,000)
Unsecured liabilities with priority 14,000
Still available 156,000
Unsecured liabilities
(16,000 + 224,000) 240,000
Estimated deficiency P 84,000
Assets 468,000
Liabilities 418,000
Stockholders Equity 50,000
Loss 134,000
Deficiency 84,000
Pay-out ratio (156,000/240,000)= P.65
2.
Estimated Amount Still Gain(Loss)
Book Value Current Value Available Realization
Assets Pledged w/ fully secured
Liabilities:
140,000 Furniture & Fixtures 121,000 ( 19,000)
Notes Payable P 84,000
Interest Payable 1,600 85,600 35,400
30,000 Books & Manuscript 14,400 ( 15,600)
Notes Payable 18,000 3,600
Free Assets
75,000 Work In Process 91,600 91,600 16,600
245,000 127,000 ( 18,000)

3. ASSETS
Fair Market Estimated Amt. Gain(Loss)
Book Value Value Available Realization
Assets Pledged w/ Fully Secured
Cre3ditors
20,000 Merchandise 13,013.70 ( 6,986.30)
Notes Payable 10,000
Interest Expense 100 10,100.00 2,913.70
Assets Pledged with Partially
Secured Creditors
5,600 Furniture & Fixtures 2,000 ( 3,600)
Notes Payable 5,000
Interest Expense 50 5,050 0
3,050
Free Assets
120 Petty Cash Fund 120 120
2,400 Cash in Bank 2,400 2,400
31,660 Accounts Receivable 25,000 25,000 6,660
20,600 Notes Receivable including Accrued 5,986
Interest 19,100 19,100 1,500
 240 Prepaid Insurance - ( 240)
1,740 Organizational Cost - ( 1,740)
190 Prepaid Advertising - ( 190)
4,000 Goodwill - ( 4,000)
59,000 Building 25,000 25,000 ( 34,000)
9,200 Merchandise 5,986.30 5,986.30 (3,213.70)
80,520 62,130
Preferred Liabilities
Accrued Wages ( 2,800)
Accrued Taxes ( 1,810)
Net Free Assets 75,910 Liquidity Ratio
________ Estimated Deficiency to Unsecured Creditors 6,940 P.9162 P1

P154,750 Liabilities still to be liquidated P82,850

EQUITIES
Preferred Liabilities
P 2,800 Accrued Wages P 2,800
1,810 Accrued Taxes 1,810
Fully Secured Creditors
10,000 Notes Payable 10,000
100 Accrued Interest 100
Partially Secured Creditors
Notes Payable including
5,050 Furniture & Equipment 5,050
Unsecured Creditors 2,000 3,050
79,800 Accounts Payable 79,800
70,000 Capital Stock
2,000 APIC
( 6,810) Retained Earnings
154,750 Net Gain/Loss on Realization P62,130
To be absorbed by Stockholders 55,190 ______
Deficiency P 6,940 82,850

PNB may recover 4,974 (2,000 + (.9162 x 3,050)

4. FLORES COMPANY
STATEMENT OF AFFAIRS
Book Current EstimAmt Loss (Gain)
Value ASSETS FairValue Available onRealization
Assets pledged w fully sec. creditors
P100,000 Land P 110,000 (10,000)
110,000 Building 121,000 (11,000)
Notes Payable (200,000)
Interest Payable (3,000) P28,000

Assets pledged w partially sec. creditors

41,000 Inventories P45,000 (4,000)
Notes Payable 75,000
P30,000
Free Assets
2,000 Cash P 2,000 2,000
15,000 Investments 21,000 21,000 (6,000)
23,000 Accts Receivable 12,000 12,000 11,000
80,000 Equipment 32,000 32,000 48,000
3,000 Prepaid Expenses 1,000 1,000 2,000
________
Total Estimated Available P 96,000
Unsecured liabilities with priority 33,000
Net free assets 63,000
Estimated deficiency to unsecured
Creditors 27,000
 ________ Total unsecured liabilities w/o priority P 90,000 _______
P374,000 P30,000
LIABILITIES Unsecured
Liabilities with priority
P33,000 Accrued Expenses P33,000 P33,000

Fully secured liabilities

200,000 Notes Payable-long term P200,000
3,000 Interest Payable 3,000

Partially secured liabilities

75,000 Notes Payable-short term P75,000
Secured by inventory 45,000 P30,000

Unsecured liabilities without priority

60,000 Accounts Payable P60,000 60,000

STOCKHOLDERS EQUITY
100,000 Common Stock P100,000
(97,000*) Retained Earnings (97,000 + 30,000) (127,000)

Total unsecured debts P 90,000 _______

________ Deficiency Amount P 27,000
P374,000
*79,000 + 15,000 + 3,000= 97,000
Pay-out ratio= 63,000/90,000= .7 x 30,000= P21,000 +45,000 or a total of P66,000 for BPI

5. ROCES CORPORATION
STATEMENT OF AFFAIRS

Book Current EstimAmt Loss (Gain)

Value ASSETS FairValue Available onRealization
Assets pledged w fully secured
creditors
P80,000 Land P 105,000 (25,000)
53,000 Building 30,000 22,000
Notes Payable (120,000) P15,000

Assets pledged with partially

secured creditors
10,000 Investments P18,000 (8,000)
Notes Payable 30,000
Unsecured liability P12,000

Free Assets
2,000 Cash P 2,000
31,000 Accts Receivable 20,800 10,200
48,000 Inventory 36,000 12,000
49,000 Equipment 20,000 29,000
5,000 Other Assets 1,000 5,000
Total 79,800
Liquidation costs (12,000) 12,000
Total Estimated free assets A) P82,800
Unsecured liabilities with priority 15,000
Net free assets B) 67,800
 Estimated deficiency to unsecured
Creditors 12,200
________ Total unsecured liabilities w/o priority P 80,000 _______
P277,000 P56,200
LIABILITIES Unsecured
Liabilities with priority
P7,000 Salaries 7,000
3,000 Accrued Taxes 3,000
5,000 Owing to receiver 5,000 P15,000

Fully secured liabilities

120,000 Notes Payable P120,000

Partially secured liabilities

30,000 Notes Payable P30,000
Secured by investments 18,000
12,000
Unsecured liabilities without priority
35,000 Notes Payable P35,000
33,000 Accounts Payable 33,000
C) 68,000
Total unsecured debts P 80,000
STOCKHOLDERS EQUITY
200,000 Common Stock (P200,000)
(156,000) Retained Earnings (106,000 + 57,000) 156,000
________ _______
P277,000 Deficiency Amount P 12,200
E) Dividend Rate (12,200/80,000)= P.8475 for every peso of unsecured liability
PNB Note = 18,000 + (.84755 x 12,000)= P28,780

6. Receivers Book Face Book

Accounts Receivable-Old 76,000 Ace De Dios-Receiver 316,000
Inventories-Old 120,000 Accounts Payable 96,000
Marketable Securities-Old 24,000 Accounts Receivable 76,000
Plant Assets 192,000 Inventories 120,000
Accounts Payable 96,000 Marketable Securities 24,000
Face In Receivership 316,000 Plant Assets 192,000

Accounts Receivable 150,000

Sales 150,000

Cost of Sales 120,000

Inventories 120,000

Cash 21,000
Loss on Sale 3,000
Marketable Securities 24,000
Cash 136,000
Accounts Recble-Old 42,000
Accounts Receivable 94,000

Depreciation 32,000
Accumulated Depn 32,000
44,000
Accounts Payable-Old
Expenses 8,600
 Cash 52,600

Sales 150,000
Income & Expense S 13,600
Cost of Sales 120,000
Loss On Sale 3,000
Depreciation 32,000
Expenses 8,600

Face In Receivership 13,600 Loss On Receivership 13,600

Income & Expense S 13,600 De Dios-Receiver 13,600

Face In Receivership 302,400 Cash 104,400

Accumulated Depn 32,000 Accounts Receivable 90,000
Accounts Payable-Old 52,000 Plant Assets 192,000
Cash 104,400 Accumulated Depn 32,000
Accounts Recble-Old 34,000 Accounts Payable 52,000
Accounts Recble-New 56,000 De Dios Receiver 302,400
Plant Assets 192,000

Statement of Realization and Liquidation

Assets to be realized: Assets Realized:
Accounts Receivable P 76,000 Accounts Receivable-Old42,000
Inventories 120,000 Accounts Receivable-New 94,000
Marketable Securities 24,000 Marketable Securities-Old 24,000
Plant Assets 192,000 Inventories 120,000
Assets Acquired: Assets Not Realized
Accounts Receivable 150,000 Accounts Receivable-Old 34,000
Liabilities Liquidated Accounts Receivable-New 56,000
Accounts Payable-old 44,000 Plant Assets (net) 160,000
Liabilities Not Liquidated Liabilities to be liquidated:
Accounts Payable-Old 52,000 Accounts Payable 96,000
Supplementary Debits Supplementary Credits
Cost of Sales 120,000 Sales 150,000
Loss on Sale 3,000
Expenses 8,600
_______ Net Loss 13,600
Totals P789,600 Totals P789,600

7. Book of Receiver Book of Neilson

Retained Earnings 16,000
Goodwill 16,000

Cash 30,000 Santos-Receiver 275,000

Marketable Securities 12,000 Allow for Bad Debts 3,000
Accounts Receivable-Old 36,000 Cash 30,000
Inventories-Old 50,000 Marketable Securities 12,000
Land 40,000 Accounts Receivable 36,000
Plant & Equipment (net) 110,000 Inventories 50,000
Allow for Bad Debts 3,000 Land 40,000
Neilson In Receivership 275,000 Plant & Equipment 110,000
Purchases 24,000
Accounts Payable-New 24,000
Accounts Receivable-New 90,000
Sales 90,000
Neilson in Receivership 73,000 Accounts Payable 73,000
Accounts Payable-New 9,000 Santos-Receiver 73,000
Operating Expenses 15,000
Trustees Expenses 6,000
Cash 103,000
Cash 67,000
Accts Receivable-Old 14,000
Accts Receivable-New 53,000
Cash 16,000
Marketable Sec-Old 12,000
Gain On Sale 4,000
Bad Debts 6,000
Allow for Bad Debts-Old 2,000
Allow for Bad Debts-New 4,000
Allow for Bad Debts-Old 3,000
Acct Receivable-Old 3,000
Depreciation Expense 12,000
Accum Depn 12,000
Sales 90,000
Gain on Sale 4,000
Income and Expense S 5,000
Inventory, End 14,000
Inventory Beg 50,000
Purchases 24,000
Expenses 21,000
Bad Debts 6,000
Depreciation 12,000
Neilson in Receivership 5,000 Loss in Receivership 5,000
Income & Expense S 5,000 Santos-Receiver 5,000
Neilson in Receivership 212,000 Cash 10,000
Allow for Bad Debts-Old 2,000 Accts. Receivable 56,000
Allow for Bad Debts-New 4,000 Inventories 14,000
Accumulated Depreciation 12,000 Land 40,000
Cash 10,000 Plant & Equipment 110,000
Accts Receivable-Old 19,000 Allow for Bad Debts 6,000
Accts Receivable-New 37,000 Accumulated Depn 12,000
Inventories 14,000 Santos-Receiver 212,000
Land 40,000
Equipment 110,000

Statement of Realization and Liquidation

Assets To Be Realized: Liabilities To Be Liquidated:
Accounts Receivable (net) 33,000 Accounts Payable(old) 95,000
Marketable Securities 12,000 Notes Payable 35,000
Inventories 50,000 Interest Payable 8,000
Land 40,000 Mortgage Payable 80,000
Plant & Equipment 110,000 Liabilities Incurred:
Assets Acquired: Accounts Payable(new) 24,000
Accounts Receivable(new) 90,000 Assets Realized:
Liabilities Liquidated: Accounts Receivable (old) 14,000
Accounts Payable (Old) 73,000 Accounts Receivable (new) 53,000
Accounts Payable (new) 9,000 Marketable Securities 12,000
Liabilities Not Liquidated: Assets Not Realized:
Accounts Payable (new) 15,000 Accounts Recble-Old (net) 17,000
Accounts Payable (old) 22,000 Accounts Recble-New (net) 33,000
Notes Payable 35,000 Inventories 14,000
Interest Payable 8,000 Land 40,000
Mortgage Payable 80,000 Plant & Equipment (net) 98,000
Supplementary Charges Supplementary Credits
Purchases 24,000 Sales 90,000
Expenses 21,000 Gain On Sale 4,000
Net Loss 5,000
Total 682,000 Total 682,000
8. ENTRIES:
Cash 60,000
Accounts Receivable-old 130,000
Inventory 204,000
Plant Assets 1,040,000
Popeye Corp in Receivership 4,500
Accumulated Depreciation 310,000
Accounts Payable old 271,000
Notes Payable- old 325,000
Accrued Interest 32,500
Bonds Payable 500,000

Accounts Receivable 702,000

Sales 702,000

Cash 528,000
Accounts Receivable new 432,000
Accounts Receivable- old 96,000

Purchases 275,000
Accounts Payable-new 275,000

Operation Expense 20,000

Receiver Expense 30,000
Cash 50,000

Accounts Payable- old 201,000

Accounts Payable- new 131,000
Cash 332,000

Cash 270,000
Loss From Sales 50,000
Accumulated Depreciation 135,890
Plant & Equipment 455,890

Notes Payable 200,000

Accrued Interest 20,000
Cash 210,000
Gain on Liability Settlement 10,000

Inventory End 41,250

Income Summary 41,250

Bad Debts Expense 15,200

Allow for Bad Debts-new 13,500
Allow for Bad Debts- old 1,700

Depreciation 10,000
Accumulated Depreciation 10,000

Interest Expense 40,000

Cash 40,000

Interest Expense 6,250

Accrued Interest 6,250

Sales 702,000
Inventory (if not adjusted on top) 41,250
Gain on Liability Settlement 10,000
Income Summary 77,200
 Inventory, Beg 204,000
Purchases 275,000
Operation Expenses 200,000
Receiver Expenses 30,000
Bad Debts 15,200
Depreciation 10,000
Interest Expense 46,250
Loss from Sale 50,000

ASSETS
To be realized: Accounts Receivable 130,000 Realized: Accts Receivable new 32,000
Inventory 204,000 Accts Receivable old 96,000
Plant & Equipment 730,000 Plant & Equipment 270,000
Acquired: Not Realized:
Accounts Receivable 275,000 Accounts Receivablenew256,500
Merchandise 702,000 Accounts Receivable old 32,300
Inventory-new 41,250
Plant & Equipment 400,000

LIABILITIES
Liquidated: Accts Payable old 201,000 To be liquidated:Accts Payable 271,000
Accts Payable new 131,000 Bonds Payable 500,000
Notes Payable 200,000 Notes Payable 325,000
Accrued Interest 10,000 Accrued Interest 32,500
Not Liquidated: Incurred:
Accounts Payable old 70,000 Accts Payable 275,000
Accounts Payable new 144,000 Accrued Interest 6,250
Notes Payable 125,000
Bonds Payable 500,000
Accrued Interest 18,750
SUPPLEMENTARY
Operation Expenses 200,000 CREDITS: Sales 702,000
Receiver Expenses 30,000
Interest Expense 46,250 Net Loss 77,200

TOTALS 3,717,000 3,717,000

Debit balance in Assets= P512,950
Cost of Sales 437,750
Bad Debts 15,200
Depreciation 10,000
Loss on Sale 50,000
Credit Balance in Liabilities P10,000 represents Gain on Liability Settlement
Cash= 60,000+528,000+270,000-230,000-332,000-210,000-40,000= P46,000
Retained Earnings= 204,500 + 77,200= debit balance of P281,700
MULTIPLE CHOICE
1.
Total Free Assets at estimated current value P320,000
Pledged against liabilities with priority 70,000
Asset still available 250,000
Excess assets after liquidating fully secured liabilities
(370,000 260,000) 110,000
Still available for unsecured liabilities 360,000
Unsecured liabilities (540,000 + 80,000) 620,000
Deficiency P260,000
Answer: 1) E (P360,000)
2) A
2. 20,000 + 40,000 + 32,000 + 10,000 16,000= 86,000 Answer A
3. Building and Equipment P715,000
Mortgage Payable 525,000
Free Assets P190,000
Other free assets 180,500
Total available assets P370,500
Less Liabilities with priority 85,500
Net free assets P282,000
Furniture and Fixtures P192,000
Notes Payable 238,000
Unsecured liabilities 46,000
Other unsecured liabilities 521,500
(610,000-85,500)
Total unsecured liabilities 567,500
Estimated deficiency P285,500 Answer B
4. Net gain on assets realized (1,375+750-1,200-1375) P450,000
Net gain on liabilities liquidated (2,250+1625-1875-1700) 300,000
Charges less credits (3,125-2,800) (325,000)
Net gain P425,000 Answer C
5. Assets not realized P1,375,000
Liabilities unliquidated P1,700,000
Share Capital 2,500,000
Retained Earnings (1,500,000) 2,700,000
Cash balance P1,325,000 Answer C

6. Net estimated loss (2,000-1,440) (P 560,000)

Addtl assets 1,280,000
Addtl liabilities (960,000)
Net loss P 240,000
Deficit 1,200,000
Total deficit P1,440,000
Capital Stock 2,000,000
Amount recoverable P 560,000
Pro-rata (560/800) P.70 Answer D
7. 30,000- 5,000= 25,000 x .4= 10,000 + 5,000= 15,000Answer C
8. Net realizable value P400,000
Portion of free assets for unsecured:
600,000-400,000=200,000 x .5 100,000
P500,000 Answer D
9. Net realizable value of assets P105,000
Liabilities per books plus interest 130,500
Deficit P 25,500 Answer D
10. Assets at realizable value P 105,000
Less fully secured liabilities 60,000
Free Assets 45,000
Unsecured liabilities with priority 6,000
Net free assets 39,000
Less unsecured liabilities 70,500
Est def to unsecured liabilities (31,500) Answer C