Solution P18-4 (in thousand)

1 POP INC. STATEMENT OF AFFAIRS

Pop Inc. Statement of Affairs on August 1, 2014

Assets
Estimated Estimated
Realizable Realizable
Values Less Value
Secured Available for
Book Creditor Unsecured
Value Liabilities Creditors
Pledged for partially secured
creditors
$775 Fixed Assets - net $475
Less: Bond payable (500)
$ 0
Available for priority and unsecured
creditors
250 Cash and equivalents 250
150 Accounts receivable 125
200 Inventories 100
Total available for priority and 475
unsecured creditors
Less: Priority liabilities (150)
Total available for unsecured 325
creditors
______ Estimated deficiency 25
$1,375 $350

Liabilities and Stockholders’ Equity

Book Secured and Unsecured Non-
Value Priority priority
Claims Claims
Partially secured
creditors
$500 Bond payable $500
Less: fixed assets (475) $25
pledged as security

Priority liabilities
150 Wages payable 150
650

Unsecured creditors
200 Account payable $200
125 Interest payable 125

Stockholders’ equity
550 Common stock
(150) Retained earnings ______
$1,375 Total unsecured non-priority claims $350
Solution P18-4 (continued)

2 ESTIMATED PAYMENTS PER DOLLAR TO EACH CLASS OF CLAIMS:

Cash Available $950

Distribution to partially secured and priority creditors:

Bond payable (secured portion) $475
Administrative expense 250
Wages payable 150 875

Available to unsecured non-priority creditors (A) $75

Unsecured non-priority creditors:

Account payable 200
Bond payable (unsecured portion) 25
Interests payable 125
Total unsecured non-priority claims (B) $350

Per dollar pro rata distribution for unsecured non-priority creditors:

A/B = $75/$350 = $0.21

a. Payments for partially secured class

Bond payable (secured portion) $475
Bond payable (unsecured portion)
$0.21  $25 5.25 $480.25

b. Payments for unsecured priority class

Administrative expense $250
Wages payable 150
Total unsecured priority class payment $400

c. Payments for unsecured non-priority class

Account payable ($0.21  $200) 42
Interests payable ($0.21  $125) 26.25
Total unsecured non-priority payment $ 68.25
Solution P18-5

1 Dan Corporation — in Chapter 7

Statement of Affairs at July 10, 2016

Assets
Realizable Realizable
Value- Value
Book Liability Available for
Value Offsets Unsecured
Fully secured
$210,000 Accounts receivable — net $160,000
Less: Notes payable 100,000 $ 60,000
Partially secured
250,000 Land and buildings — net $140,000
Less: Mortgage and interest
payable 205,000 0
Unsecured
80,000 Cash 80,000
200,000 Inventories 210,000
150,000 Equipment — net 60,000
10,000 Intangible assets 0
Available for priority and
unsecured 410,000
Priority liabilities 150,000
Available for nonpriority
unsecured 260,000
Estimated deficiency 155,000
$900,000 $415,000

Equities
Secured and Unsecured-
Book Priority Nonpriority
Value Claims Claims
Priority liabilities
$ 50,000 Accounts payable $ 50,000
24,000 Wages payable 24,000
76,000 Taxes payable 76,000
150,000
Fully secured
100,000 Note payable $100,000
Less: Accounts receivable — net 160,000
(60,000)
Partially secured
205,000 Mortgage and interest payable $205,000
Less: Land and buildings — net 140,000
65,000 $ 65,000
Unsecured
350,000 Accounts payable 350,000
300,000 Capital stock
(205,000) Retained earnings deficit _________
$900,000 $415,000
Solution P18-5 (continued)

2 Claims by Amounts to Amounts to Be

Priority Ranks Be Paid Written Off
Priority claims
Administrative expenses $ 11,000 $ 11,000
Accounts payable 50,000 50,000
Wages payable 24,000 24,000
Taxes payable 76,000 76,000
Fully secured claims
Note payable 100,000 100,000
Partially secured claims
Mortgage and interest payable 205,000 140,000 $ 26,000
39,000
Unsecured
Accounts payable 350,000 210,000 140,000
$816,000 $650,000 $166,000

Calculation of recovery for unsecured nonpriority claims

Cash available $650,000

Less: Paid to priority claims (161,000)
Less: Paid to fully secured claims (100,000)
Less: Paid to partially secured creditors – secured portion (140,000)

A Cash available for unsecured $249,000

Unsecured claims:
Partially secured ($205,000 - $140,000 secured) $ 65,000
Accounts payable — nonpriority 350,000

B Total unsecured claims $415,000

A  B = $249,000/$415,000 = $.60 recovery on the dollar

Solution P18-6

1 Val Corporation
Statement of Affairs on June 30, 2016

Assets
Realizable
Values- Realizable
Liability Value
Offsets for Available for
Book Secured Unsecured
Value Creditors Creditors
Pledged for fully
secured creditors
$230,000 Land and building $170,000
Less: Mortgage payable
and accrued interest (165,000) $ 5,000
Available for priority
and unsecured creditors
40,000 Cash 40,000
70,000 Accounts receivable — net 63,000
50,000 Inventories 42,000
60,000 Machinery — net 20,000
50,000 Goodwill 0
Total available for priority and unsecured
Creditors 170,000
Less: Priority liabilities 70,000
Total available for unsecured creditors 100,000
Estimated deficiency 65,000
$500,000 $165,000

Liabilities and Stockholders’ Equity

Secured and Unsecured
Book Priority Non-priority
Value Claims Claims
Priority liabilities
$ 60,000 Wages payable $ 60,000
10,000 Property taxes payable 10,000
70,000
Fully secured creditors
150,000 Mortgage payable $150,000
15,000 Interest on mortgage payable 15,000
165,000
Unsecured creditors
110,000 Accounts payable $110,000
50,000 Note payable — unsecured 50,000
5,000 Interest payable — unsecured 5,000
Stockholders’ equity
200,000 Capital stock
(100,000) Retained earnings (deficit)
________
$500,000 $165,000

2 Settlement per dollar of rank 1 unsecured creditors is $.6250 ($100,000

available for unsecured/$160,000 accounts and notes payable). No payment
is made for the $5,000 unsecured interest claim.