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Practice Problems Corporate Liquidation

1) The document provides information about the liquidation of Genesis Company, including asset and liability amounts. It asks to compute the net free assets, amounts owed to secured and unsecured creditors, and recovery percentages. 2) The second problem provides liquidation information for Exodus Company over 3 months. It asks to compute the net gain/loss for the period and the ending cash balance. 3) Both problems require calculating amounts related to the liquidation process, such as amounts owed to different types of creditors and net assets available.

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1K views2 pages

Practice Problems Corporate Liquidation

1) The document provides information about the liquidation of Genesis Company, including asset and liability amounts. It asks to compute the net free assets, amounts owed to secured and unsecured creditors, and recovery percentages. 2) The second problem provides liquidation information for Exodus Company over 3 months. It asks to compute the net gain/loss for the period and the ending cash balance. 3) Both problems require calculating amounts related to the liquidation process, such as amounts owed to different types of creditors and net assets available.

Uploaded by

Allira Orcajada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Accounting for Special Transactions (AC14)

Practice Problems – Corporate Liquidation

Problem 1
The following information is available on June 1, 2018 to Genesis Company, which is having difficulty in
paying its liabilities as they become due:

Carrying Amount
Cash ₱8,960
Accounts receivable, net, fair value equal to carrying amount 103,040
Inventories, current fair value, ₱40,320 pledged on ₱47,040 of notes payable 87,360
Machinery and equipment, net, current fair value of ₱150,976 pledged on
mortgage note payable 239,680
Office supplies, current fair value of ₱5,600 4,480
Wages payable 12,992
Taxes payable 2,688
Accounts payable 134,400
Notes payable, ₱47,040 of which is secured by inventories 89,600
Mortgage note payable 112,896
Common stock, ₱5 par 224,000
Retained earnings, deficit 133,056

Additional information:
(1) Estimated liability to the trustee is ₱58,240.
(2) A delivery van previously given to the supervisor was returned to the company, fair market value,
₱56,000.

REQUIRED:
Compute for the following:
a. Net free assets
b. Liabilities to:
1. Fully secured creditors
2. Partially secured creditors
3. Unsecured creditors with priority
4. Unsecured creditors without priority
c. Recovery percentage of unsecured liabilities without priority
d. Amount of recovery of the following:
1. Fully secured creditors
2. Partially secured creditors
3. Unsecured creditors with priority
4. Unsecured creditors without priority
Problem 2
The following data were taken from the statement of realization and liquidation of Exodus Company for
the three-month period ending December 31, 2020:

Assets to be realized 1,375,000 Assets acquired 750,000


Supplementary credits 2,800,000 Assets realized 1,200,000
Liabilities to be liquidated 2,250,000 Liabilities assumed 1,625,000
Supplementary charges 3,125,000 Assets not realized 1,375,000
Liabilities liquidated 1,875,000 Liabilities not liquidated 1,700,000

The ending balances of capital stock and retained earnings are ₱1,500,000 and ₱238,000, respectively. A
net loss of ₱738,000 was reported for the year.

REQUIRED:
Compute for the following:
a. Net gain/(loss) for the three-month period.
b. Ending balance of cash.

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