Financial reporting during bankruptcy
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 |
$110,000 |
|
Accounts payable |
60,000 |
|
Wages payable |
10,000 |
|
Property taxes payable |
150,000 |
|
Mortgage payable |
15,000 |
|
Interest on mortgage payable |
50,000 |
|
Note payable—unsecured |
5,000 |
|
Interest payable—unsecured |
200,000 |
|
Capital stock |
(100,000 ) |
|
Retained earnings deficit |
$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% 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.