Chapter 6 Advacc 1 Dayag

Chapter 6
Problem I
1. Statement of Affairs - Formal
MINER COMPANY
Statement of Affairs
May 31, 2012
Assets
Book Value
Realizable
Value
P 50,000
Assets Pledged with Fully Secured Creditors:

Notes Receivable
1,200
Accrued Interest Rec.

Notes Payable
P39,800
1,000
P 40,800
40,000
800
40,800
Accrued Interest Pay.
119,000
Building
Note Payable
Accrued Interest Pay.
75,000
20,000
800
20,800
P 54,200
Assets Pledged with Partially Secured Creditors:

13,200
Equipment
4,200
10,000
Note Payable
6,000
61,000
60,000
1,100
Free Assets
Cash
Accounts Receivable
Inventory
Prepaid Insurance
Goodwill
6,000
50,000
30,000
400
0
8,500
Total Net Realizable Value
140,600
Liabilities having Priority Wages

6,000
Taxes
8,400
2,400
Net Free Assets
132,200
Estimated Deficiency to Unsecured Creditors
P 320,000
Book
Value
53,600
P 185,800
Unsecure
d
Equities
Liabilities Having Priority:
P 6,000
P 6,000
Accrued Wages
2,400
2,400
P 8,400
Taxes Payable
60,000
1,600
Fully Secured Creditors:

Notes Payable
Accrued Interest Payable
60,000
1,600
61,600
10,000
Partially Secured Creditors:
10,000
Note Payable
4,200
Equipment
P 5,800
170,000
10,000
110,000
( 50,000)
P 320,000
Unsecured Creditors:
Accounts Payable
Notes Payable
170,000
10,000
Stockholders Equity
Common Stock
Retained Earnings
(Deficit)
P 185,800
2. Deficiency Statement to determine estimated deficiency to unsecured creditors:
Deficiency Account
May 31, 2012
Estimated Losses:
Accounts Receivable
Estimated Gains:
P 11,000
Common Stock
P
110,000
(50,000)
Notes Receivable
10,400
Retained Earnings
Inventory
30,000
Estimated Deficiency to
Buildings
44,000
Unsecured Creditors
Equipment
Prepaid Insurance
Goodwill
53,60
0
9,000
700
8,500
P113,600
P 113,600
Estimated final dividend rate to unsecured creditors is: P132,200/P185,800 = 71.15%

Problem II
1. Formal
Down Dog Corporation
Statement of Affairs
June 30, 2014
Book Value
P165,000
3,000
72,000
60,000
______
P300,000
Assets
Pledged with partially secured creditors
Equipment-net
P87,000
Less: Note payable and accrued interest
(96,000)
Unsecured amount (See below)
(9,000)
Free Assets
Cash
3,000
Accounts receivable-net
48,000
Inventories
72,000
Total net realizable value
123,000
Less: Priority liabilities wages payable
(45,000)
Total available for unsecured creditors
78,000
Estimated deficiency to unsecured creditors 30,000
P108,000
Deficiency
Account
Realizable Value (Loss/Gain)
P
(24,000)
12,000
______
(90,000)
Unsecured
Equities
Book Value
P 45,000
96,000
72,000
27,000
180,000
(120,000)
P300,000
Priority liabilities
Wages payable (assumed under
P4,650 per employee)
Partially secured creditors
Note payable and accrued interest
Less: Equipment pledged as security
Liabilities
P 45,000
P 96,000
(87,000)
Unsecured creditors
Accounts payable
Rent payable
P 9,000
72,000
27,000
Stockholders equity
Capital stock
Retained earnings (deficit)
______
P108,000
Estimated Deficiency
2. Estimated payments per dollar for unsecured creditors

Cash available
Distribution to partially secured and unsecured priority creditors:
Note payable and interest
P87,000
Administrative expenses
24,000
Wages payable
45,000
Available to unsecured nonpriority creditors
180,000
(120,000)
P 60,000
P(30,000)
P210,000
(156,000)
P 54,000
Note payable and interest (unsecured portion)

Accounts payable
Rent payable
Unsecured nonpriority claims
P 9,000
72,000
27,000
P108,000
(P54,000 / P108,000 = P0.50 per peso)

Expected recovery for each class of claims
Partially secured
Note payable and interest
Secured portion
Unsecured portion (P9,000 0.50)
P87,000
4,500
P91,500
Unsecured priority
Administrative expenses
Wages payable
P24,000
45,000
69,000
Unsecured nonpriority
Accounts payable (P72,000 0.50
Rent payable (P27,000 0.50)
Total payments
P36,000
13,500
49,500
P210,000
Problem III
Realizable value of all assets (P635,000 + P300,000 + P340,000)P1,275,000
Allocated to:
Fully secured creditors
(316,000)
Partially secured creditors
(300,000)
Unsecured creditors with priority

Remainder available to general unsecured creditors
Payment rate to general unsecured creditors
(Including balance due to partially secured creditors)
P559,000 / (P1,165,000 + (P400,000 - P300,000))
Realizable value of assets:
Assets pledged to fully secured creditors
Assets pledged to partially secured creditors
Free assets
Total realizable value
(100,000)
P559,000
44.2%
P635,000
300,000
340,000
P1,275,000
Amounts to be paid to:

Fully secured creditors
P316,000
Partially secured creditors [P300,000 + (0.442 P100,000)]
344,200
Unsecured creditors with priority
100,000
General unsecured creditors (0.442 P1,165,000)
514,800*
Total
P1,275,000
*Rounded P130
Problem IV
Free Assets:
Current Assets ..................................................................
Buildings and Equipment .................................................
Total .........................................................................
P 35,000
110,000
P145,000
Liabilities with Priority:

Administrative Expenses ..................................................
Salaries Payable (only P3,000 per employee)...................
Income Taxes ...................................................................
Total .........................................................................
P 20,000
6,000
8,000
P 34,000
Free Assets After Payment of Liabilities with Priority

(P145,000 P34,000) ......................................................
P111,000
Unsecured Liabilities
Notes Payable (in excess of value of security) .................
Accounts Payable .............................................................
Bonds Payable ..................................................................
Total .........................................................................
P 30,000
85,000
70,000
P185,000
Percentage of Unsecured Liabilities To Be Paid: P111,000/P185,000 = 60 %

Payment On Notes Payable:
Value of Security (land) ....................................................
60% of Remaining P30,000 ..............................................
Total Collected by holders ................................................
Problem V
Free Assets:
Cash
.........................................................................
Receivables (30 percent collectible)..................................
Inventory .........................................................................
P 90,000
18,000
P108,000
P30,000
15,000
39,000
Land (value in excess of secured note:

P120,000 P110,000)..................................................
Total .........................................................................
10,000
P94,000
Less: Liabilities with priority

Salary payable (below maximum)...............................
Free assets available...................................................
(10,000)
P84,000
Unsecured Liabilities:
Accounts payable..............................................................
Bonds payable (less secured interest in
building: P300,000 P180,000)...................................
Unsecured liabilities....................................................
P90,000
120,000
P210,000
Percentage of unsecured liabilities to be paid: P84,000/P210,000 = 40%

Amounts to be paid for:
Salary payable (liability with priority to be paid
in full) .........................................................................
Accounts payable (unsecuredwill collect 40%
of debts of P90,000)....................................................
Note payable (fully secured by landwill collect
entire balance)...........................................................
Bonds payable (partially securedwill collect
P180,000 from building and 40 percent of the
remaining P120,000)...................................................
Problem VI
Class of Creditors
Fully secured liabilities
Partially secured liabilities
Unsecured liabilities with priority
Unsecured liabilities without priority
Total
Creditors
Claims
183,600
54,600
30,810
182,500
Problem VII
1. Total estimated proceeds
Less asset proceeds claimed by secured
creditors:
Notes payable and interest (from
proceeds of receivables and inventory)
Mortgage payable and interest (from
proceeds of land and building)
Total available to unsecured claimants.
Less distributions to unsecured claims
with priority:
Wages payable
Taxes payable
Amount available for unsecured claims
2.
Unsecured portion of notes payable and

interest (P500,000 + P30,000 P150,000)
P10,000
P36,000
P110,000
P228,000
Total
Amounts
Expected to
be
Recovered
183,600
51,720
30,810
116,800
% of Total
Claims
Expected to
be
Recovered
100.0
94.7
100.0
64.0
P910,000
P150,000
320,000
P 10,000
20,000
470,000
P440,000
30,000
P410,000
P380,000
Accounts payable
Total claims ofunsecured creditors
Dividend to Unsecured Creditors
P410,000 P640,000 = 64.1%
3.
260,000
P640,000

Interest
Dividend on unsecured amount
Amount received on unsecured portion
Proceeds from receivables and inventory
Total Received
P380,000
64.1%
P243,580
150,000
P393,580
Dividend to note holders: P393,580 P530,000 = 74.3%

Problem VIII
1.
WILBUR CORPORATION
STATEMENT OF AFFAIRS
DECEMBER 31, 20x4
Assets
Estimated
Current
Values
Book Value
P 40,000
50,000
110,000
(1) Assets pledged with fully

secured
creditors:
Accounts receivable (net)
Less: 10% note payable and
interest
Land
Plant and equipment (net)
Less: Mortgages payable and
interest
20,000
35,000
4,000
35,000
55,000
6,000
140,000
48,000
(2) Assets pledged with partially

secured creditors:
Marketable securities
Less: 10% note payable and
interest
Inventory
Less: Accounts payable
(3) Free assets:
Cash
Inventory
Prepaid insurance
Plant and equipment (net)
Franchises
Estimated
Amount
Available to
Unsecured
Claims
Estimated
Gain
(Loss) on
Realizatio
n
P 40,000
38,500
P 1,500
P 65,000
100,000
P165,000
(157,500)
P 15,000
(10,000)
7,500
P 16,000
(4,000)
(20,800)
P 32,000
(60,000)
P 4,000
35,000
50,000
1,000
60,000
15,000
(3,000)
4,000
35,000
50,000
1,000
60,000
15,000
(5,000)
(5,000)
(80,000)
(33,000)
P 543,000
Estimated amount available

Less: Creditors with priority
Net available to unsecured creditors
Estimated deficiency
P 174,000
(43,000)
P 131,000
45,000
Total unsecured debt
P 176,000
(P
125,000)
2. Percentage to unsecured creditors: P131,000/P176,000 = 74.43%

Problem IX
Assets to be realized
Old Receivebles, net
50,000
Marketable Securities
20,000
Old Inventory
72,000
Depreciable Assets, net
120,000
Smith Company
Statement of Realization and Liquidation
Assets
Assets Realized
P
Old Receivbles
28,000
New Receivbles
65,000
Marketable Securities
15,000
Sales of Inventory
100,000
Assets Acquired
Assets Not Realized
New Receivables
100,000
Old Receivables, net

22,000
New Receivables, net
35,000
Depreciable Assets
96,000
Supplementary Charges
Old Current Payables
31,000
Supplementary Items
Supplementary Credits
P
Net Loss
7,000
Liabilities Not Liquidated

34,000
Liabilities
Liabilities to be Liquidated
Liabilities Liquidated
31,000
P
65,000
Liabilities Incurred
P
P43
3,000
_____
___
P
433,000
Problem X
Mallory Corporation
For the Three Months Ended July 31, 20x5
Assets
Cash
Non-Cash
P 4,000
P720,000
Assets
Beginning balances assigned 5/1/x5
Cash Receipts:
Collection of Accounts Receivable
Sale of inventory
Sale of land and building
Sale of machinery
Cash Disbursements:
Payment of salaries payable
Partial payment of accounts pay.
Partial payment of bank loan
Ending balance
Assets
Beginning balances assigned
5/1/X5Receipts:
Cash
Collection of Accounts
Receivable
Sale of inventory
Sale of land and building
Sale of machinery
Cash Disbursements:
Payment of salaries payable
Partial payment of accounts
payPartial payment of bank loan
Ending balance
Fully
Secured
P240,00
0
(240,00
0)
________
P
0 P
60,000
170,000
20,000
70,000
(70,000)
(200,000)
(340,000)
(100,000)
(60,000)
(170,000)
(70,000)
P24,000
P10,000
Liabilities
Unsecured
Partially
With
Without
Owner's
Secured Priority Priority
Equity
P270,00 P94,000
P 0 P120,000
0
(10,000)
(30,000)
(80,000)
(30,000)
(60,000
)
(180,00
10,000
0)
(90,000) ________
20,000
P P34,000 P30,000
0
________
P
(30,000)
Multiple Choice Problems

1. d since there is parent and subsidiary relationship, any intercompany accounts are
eliminated from consolidated point of view.
2. a - [P90,000 + P36,000 + P10,000 P45,000 = P91,000 total estimated amount
available; P91,000 (P4,500 + P10,000) = P76,500 estimated amount available for
unsecured, non-priority creditors; P76,500 P90,000 = 0.85]
3. c it is a partially secured liability
4. d [(P1,110,000 P780,000) + P960,000] P210,000 = P1,080,000
5. b P25,000 + [.30 x (P75,000 P25,000)] = P40,000
6. d (P555,000 P390,000) + P480,000 = P645,000 P105,000 = P540,000
7. b P30,000 + [.30 x (P90,000 P30,000)] = P48,000
8. c [ P110,000 + (P150,000 P110,000) x 40%] = P128,000
9. d
10. c P60,000 + [(P120,000 + P6,000) (P30,000 + P35,000) = P121,000
11. b - P20,000 + P80,000 + [P170,000 (P150,000 + P7,000)] = P113,000 (P10,000 +

P10,000)
= P93,000
12. c P93,000/P121,000 = 77% rounded.
13. a
Net Free Assets:
(P700,000 P300,000) + P70,000 + P230,000 = P700,000 P140,000 = P560,000
Total Unsecured Creditors without priority:
(P400,000 P300,000) + P600,000 = P700,000
14. c - Pension P10,000 + Salaries P35,000 (= P10,600 + P10,950 + P10,950 + P2,500) +

Taxes P80,000 + Liq. expenses P40,000 = P165,000.
15. c

Assets to be Realized.
Assets Acquired..
Liabilities Liquidated.
Liabilities Not Liquidated.
Supplementary charges/
debits
P 1,375,000
750,000
1,875,000
1,700,000
Assets Realized..P 1,200,000

Assets Not Realized 1,375,000
Liabilities to be Liquidated.
2,250,000
Liabilities Assumed..
1,625,000
Supplementary credits
2,800,000
3,125,000
P 8,825,000
P 9,250,000
Net Gain.. P 425,000
16. No requirement
17. c
Total Liabilities (refer to Liabilities not liquidatedNo. 14) P1,700,000
+: Stockholders Equity (P1,500,000 P500,000) 1,000,000
Total LSHE = Total Assets P 2,700,000
-: Noncash assets (refer to Assets not realized-No. 14). 1,375,000
Cash balance, endingP1,325,000
18. P440,000
Total Free Assets:
Fully secured:
Land and building: P650,000 (P300,000 + P20,000) = P 330,000
Free assets:
Cash
Equipment
10,000
100,000
P440,000
Or,
Total estimated proceeds
creditors:
Total available to unsecured claimants/total free
19. P410,000
Total available to unsecured claimants/total free
with priority:
P910,000
P150,000
320,000
470,000
P440,000
P440,000
Wages payable
Taxes payable
Amount available for unsecured
claims/net free assets
P 10,000
20,000
30,000
P410,000
20. P640,000 = P260,000 + [(P50,000 + P100,000) (P500,000 + 30,000), or

interest (P500,000 + P30,000 P150,000)
P380,000
Accounts payable
260,000
Total claims of unsecured creditors
P640,000
21. 64.1%
Dividend to unsecured creditors
P410,000 P640,000 = 64.1%
22. P320,000 = P300,000 + P20,000
23. P393,580
interest
Total Received
P380,000
x
64.1%
P243,580
150,000
P393,580
24. P30,000
25. P166,666 = P260,000 x 64.1
26. P910,247 = P320,000 + P393,580 + P30,000 + P166,666 (discrepancy of P247 due to
rounding-off)
27. P230,000
Net free assets (No. 19)
Less: Unsecured creditors without priority (No. 20)
P410,000
640,000
P230,000
28. P340,000 = P910,000 P1,250,000
29. P340,000, same with No. 28, since there are no unrecorded expenses liabilities)
30. P60,675 you may the same procedure in Nos. 18 to 29 to solve this problem, the
following is the formal presentation of statement of affairs
Estimated
Net
Realizable
Value
Book
Value Assets
Assets pledged with fully secured
creditors:
98,500
Land and Bldg
92,800
5,800
Investment in Calandir
15,000
Total
107,800
Assets pledged with partially
secured creditors:
41,000
Inventory
20,000
43,000
Equipment
8,000
Free Assets:
1,850
Cash
1,850
21,200
Accounts Rec
17,000
15,000
Note Rec
15,000
Estimated Amount Avail for unsecured creditors
with and without priority
Less unsecured creditors with priority
Estimated amounts for unsecured creditors
without priority (Net Free Assets):
Net Realizable Amount Avail
_______
Deficiency
_______
226,350
169,650
Book Liabilities
Value and Owners Equity
Fully Secured Creditors:
600
Accrued Mtg Interest
70,000
Mortgage Payable
375
Accrued N/P Interest
10,000
Note Payable
Total
Partially Secured
Creditors:
50,000
Accounts Payable
Unsecured Creditors with
Priority:
3,775
Accrued Payroll
Unsecured creditors without
Priority:
40,625
Accounts Payable
10,00
Other Accrued Liabilities
0
185,375
Totals
40,975
Owner Equity
226,350
Estimated
Secured
Amount
Estimated Amt
Avail for
Unsecured
Creditors
22,200
4,625
Estimated
Gain or
(Loss)on
Liquidation
(5,700)
9,200
(21,000)
(35,000)
1,850
17,000
15,000
0
(4,200)
0
60,675
(3,775)
56,900
15,725
72,625
_______
(56,700)
Estimated Unsecured Amount

With
Without
Priority
Priority
600
70,000
375
10,000
80,975
28,000
22,000
3,775
40,625
10,000
_______
108,975
31. P56,900 refer to No. 30 for computation

32. P72,625 refer to No. for computation
3,775
72,625
33.
34.
35.
36.
37.
38.
Dividend - P56,900/P72,625 = P.78 refer to No. 30 for further computation

P80,975 refer to No. 30 for computation
P45,160 = P28,000 + (P22,000 x 78%)
P3,775
P39,487.50 = 78% x (P40,625 + P10,000)
P169,397.50
No. 34..P 80.975
No. 35.. 45,160
No. 36..
3,775
No. 37.. 39,487.50
P169,397.50 (discrepancy around P250 plus due to rounding-off)
39.
40.
41.
42.
P15,725 refer to No. 30 or P56,700, estimated net loss P40,975, owners equity
P56,700 refer to No. 30 or P169,650 P226,350
P56,700 (same with No. 40 since there are no unrecorded expenses liabilities)
P22,475
Liabilities
Unsecured
Assets
Fully
Partial
With Without Owners'
Cash Noncash Secured Secured Priority Priority
Equity
6/1/x5 Balances:
1,850 224,500 80,975
50,000
3,775
50,625 40,975
Cash
Receipts:
Securities
16,000
(5,800)
Sale
N/R Collected 15,000 (15,000)
Equipment
7,000 (43,000)
Sale
Inventory
22,000 (41,000)
Sale
Cash Disbursements:
Bank Loan
(10,375
)
Part Pyt-A/P
(29,000
---------)
6/30 Balance
22,475 119,700
43.
44.
45.
46.
47.
48.
10,200
0
(36,000
)
(19,000
)
(10,375
)
--------70,600
(50,000
)
0
-------
21,000
----------
3,775
71,625
(3,825)
P119,700 refer to No. 42

None refer to No. 42
(P3,825) deficit refer to No. 42
49. P150,900
Book
Value
57,000
174,000
Estimated
Net
Realizable
Assets
Value
Assets pledged with fully secured creditors:
45,000
Land, plant and equipment (net)
150,000
Total
195,000
Estimated
Amount
Available
for
Unsecured
Creditor
12,600
77,400
Estimated
Gain or
(Loss) on
Liquidation
(12,000)
(24,000)
6,000
900
90,000
Free assets:
Notes receivable
Accrued interest receivable
Inventories (90,000 x 60%)
Estimated amount available for
unsecured creditors with and
without priority
Less unsecured creditors with priority
Estimated amounts for unsecured
creditors without priority:
Net realizable amount available
Deficiency
327,900
Totals
6,000
900
54,000
6,000
900
54,000
0
0
(36,000)
150,900
(26,900)
124,000
26,000
255,900
Estimated
Secured
Amount
150,000
(72,000)
Estimated Unsecured
Amount
Book
Value Liabilities and Owners' Equity
With Priority
Fully secured creditors:
3,600
Accrued interest
3,600
69,000
Note payable
69,000
2,400
Accrued interest
2,400
30,000
Note payable
30,000
Total
105,000
Unsecured creditors with priority:
24,900
Wages payable
24,900
Administration fees
0 accountants fee
2,000
Unsecured creditors without priority:
0
Accrued interest
18,000
Cash overdraft
6,000
Notes payable
126,000
Accounts payable
--------------279,900
Totals
105,000
26,900
48,000 Owners' equity--see Note A
327,900
Note A: Includes the effect of the P2,000 professional fee.
50. P124,000 refer to No. 49

51. P150,000
52. 82.67% = P124,000/P150,000
53. P105,000
54. None
55. P26,900
56. P124,005 = P150,000 x 82.67%
57. P255,900 = P72,000 + P26,900 + P124,005 (discrepancy of P5)
Without
Priority
0
18,000
6,000
126,000
150,000
58. P26,000 = (P72,000 + P2,000 unrecorded ) P48,000 or P150,000 P124,000

59. P72,000 refer to No. 49
60. P74,000 = P72,000, loss of realization of assets + P2,000 unrecorded expenses
Quiz - VI
1. P96,000
Claims of partially secured creditors..................................................
Current value of assets pledged with these creditors............................
Deficiency that is unsecured..................................................................
Claims of other unsecured creditors....................................................
Total unsecured creditors claims........................................................
Amount available to unsecured creditors:
Excess left over after paying fully secured creditors
(P195,000 P150,000)........................................................................
Current value of free assets (net of P45,000 to
creditors with priority)...................................................................
Amount available to unsecured creditors..........................................
Settlement to unsecured claims per dollar (P160,000/P400,000)..........
Total distribution to partially secured creditors:
Current value of assets pledged..........................................................
Deficiency of P40,000 P.40...............................................................
P 120,000
(80,000)
P
40,000
360,000
P 400,000
P 45,000
115,000
P160,000
P
.40
P 80,000
16,000
P 96,000
2. P144,000 = P360,000 x 40%

3. P56,000
Claims of partially secured creditors..................................................
Current value of assets pledged with these creditors............................
Deficiency that is unsecured..................................................................
Claims of other unsecured creditors....................................................
Total unsecured creditors claims........................................................
Amount available to unsecured creditors:
Excess left over after paying fully secured creditors
(P300,000 P250,000)........................................................................
Current value of free assets (net of P60,000 to
creditors with priority)...................................................................
Amount available to unsecured creditors..........................................
Settlement to unsecured claims per peso (P36,000/P240,000)..............
Total distribution to partially secured creditors:
P 90,000
(50,000)
P 40,000
200,000
P 240,000
P 50,000
(14,000)
P 36,000
P
.15
Current value of assets pledged..........................................................

Deficiency of P40,000 P.15...............................................................
P 50,000
6,000
P 56,000
4. P30,000 = P200,000 x 15%

5. P35,000 = P20,000 + (P70,000 P20,000) x 30%
6. P96,000 = Free assets P220,000 - priority claims P100,000 = P120,000
P120,000/P300,000 unsecured = payment of 40% on unsecured peso
40% x P240,000 A/P = P96,000
7. P474,000 = Land and building sold for P450,000 leaves P60,000 unsecured still owing.
40% x
P60,000 = P24,000
8. P295,000 = P200,000 + P95,000
9. P42,950 - (P10,950 + P2,000 + P20,000 + P10,000)
10. P76,050 - Excess of salaries, P1,050 + notes pay in excess of security P25,000 +
accounts pay P50,000
11. P163,800
Free assets:
Other assets
P104,000
Excess from assets pledged with secured
(P150,800 P91,000)
59,800
P163,800
12. P109,200
Total free assets
P163,800
54,600
P109,200
13. P364,000
Unsecured creditors:
Excess of partially secured liabilities over
Pledged assets (P169,000 P65,000)
P104,000
Unsecured creditors
260,000
P364,000
14. P96,200
Payment of partially secured debt:
Value of pledged assets
P 65,000
30%* of remaining P104,000
31,200
P 96,200
*P109,200/P364,000 = 30%
15. P78,000
Cash
Excess of pledged with secured liabilities
(P117,000 P104,000)
16. P52,000
Free assets after of liabilities with priority:
Total free assets
17. P260,000
P 65,000
P 78,000
13,000
P 78,000
26,000
P 52,000
Unsecured creditors:
Excess of partially secured liabilities over
pledged assets (P195,000 P169,000) P 26,000
Accounts payable
234,000
P 260,000
18. P174,200
Payment on bond:
Value of pledged assets
P 169,000
20%* of remaining P26,000
5,200
P 174,200
Free after priority: P52,000/P260,000 = 20%
19. P247,000
Free assets
Excess from assets pledged with fully secured
(P260,000 P195,000)
Amount available
Unsecured liabilities with priority
Net free assets / available for unsecured
P390,000
65,000
P455,000
( 208,000)
P247,000
20. P32,000
Cash
Mortgage payable, paid in full
Note payable to bank, secured portion
Priority claims (P16,000 of administrative costs +

P2,000 of customer deposits + P4,000 property tax)
Available for unsecured nonpriority claims
120,000
60,000 )
60,000
30,000 )
30,000
22,000 )
8,000
Unsecured, nonpriority claims:

Unsecured portion of note payable to bank
Accounts payable
Total unsecured, nonpriority claims
10,000
30,000
40,000
P8,000 cash/P40,000 claims = P.20 on the dollar

Amount paid to bank:
P30,000 for secured portion + (P10,000 x .20) for
unsecured portion =
32,000
21. P15,400
Mortgage note receivable
Less: Portion secured by equipment
Unsecured portion
Estimated recovery on secured portion

Estimated recovery on unsecured portion
(P28,000 x P.30) =
Recovery on mortgage note receivable
35,000
7,000
28,000
7,000
8,400
15,400
22.
Mortgage note receivable
Less: Portion secured by marketable securities
Unsecured portion
Estimated recovery on secured portion
80,000
60,000
20,000
60,000
Estimated recovery on unsecured portion

(20,000 x P.25) =
Recovery on mortgage note receivable
5,000
65,000
23. P30,000
Book value of assets
Net realizable of assets
P700,000
370,000
P330,000
Less stockholders' equity

(P700,000 P400,000)
Deficiency
24
.
25
.
26
.
27
.
300,000
P 30,000
P.75 Dividend = P370,000 P250,000 P30,000 / P400,000 P250,000

P30,000
P8,500 = P7,000 + [(P9,000 P7,000) x .75]
P410,000
Total estimated proceeds
creditors:
Total available to unsecured claimants.
with priority:
Wages payable
Taxes payable
Amount available for unsecured creditors
P910,000
P150,000
320,000
P 10,000
20,000
64.10%
interest (P500,000 + P30,000 P150,000)
Accounts payable
Total claims of unsecured creditors
470,000
P440,000
30,000
P410,000
P380,000
260,000
P640,000
Dividend to unsecured creditors:

P410,000 P640,000 = 64.1%
28
.

Interest
Total Received
THEORIES
1. debtor
P380,000
x 64.1%
P243,580
150,000
P393,580
2. P5,000
3. inability to pay debts as they mature
4. a. administrative costs
b. certain postfiling gap claims in involuntary filings
c. wages, salaries, and commissions
d. employee benefit plans
e. deposits by individuals
f. taxes
5. infrequent
6. two-thirds, more than one-half
7. fraudulent, preferential
8. realization and liquidation
9.
False
14
.
False
19
.
False
24
.
29
.
34.
39
.
10
.
11
.
12
.
13
.
False
15
.
16
.
17
.
18
.
True
20
.
21
.
22
.
23
.
False
25
.
26
.
27
.
28
.
30
.
31
.
32
.
33
.
35
.
36
.
37
.
38
.
40
.
41
.
42
.
43
.
44.
49.
54.
45
.
46
.
47
.
48
.
50
.
51
.
52
.
53
.
55
.
56
.
57
.
58
.
59
.
60
.
False
True
False
c
a
b
True
True
True
d
b
c
a
a
b
a
d
c
b
a
b
c
b
a

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What are the main components of a Statement of Affairs?

What are the main components of a Statement of Affairs?

What are the types of creditors listed in a Statement of Affairs and their order of priority?

What are the types of creditors listed in a Statement of Affairs and their order of priority?

Chapter 6

Assets Pledged with Fully Secured Creditors:

Accrued Interest Rec.

Accrued Interest Pay.

Assets Pledged with Partially Secured Creditors:

Liabilities having Priority Wages

Net Free Assets

Estimated Deficiency to Unsecured Creditors

Fully Secured Creditors:

Partially Secured Creditors:

2. Deficiency Statement to determine estimated deficiency to unsecured creditors:

Estimated final dividend rate to unsecured creditors is: P132,200/P185,800 = 71.15%

Down Dog Corporation

2. Estimated payments per dollar for unsecured creditors

Note payable and interest (unsecured portion)

(P54,000 / P108,000 = P0.50 per peso)

Unsecured creditors with priority

Amounts to be paid to:

Liabilities with Priority:

Free Assets After Payment of Liabilities with Priority

Percentage of Unsecured Liabilities To Be Paid: P111,000/P185,000 = 60 %

Land (value in excess of secured note:

Less: Liabilities with priority

Percentage of unsecured liabilities to be paid: P84,000/P210,000 = 40%

Unsecured portion of notes payable and

Unsecured portion of notes payable and

Dividend to note holders: P393,580 P530,000 = 74.3%

(1) Assets pledged with fully

(2) Assets pledged with partially

Estimated amount available

Total unsecured debt

2. Percentage to unsecured creditors: P131,000/P176,000 = 74.43%

Assets Not Realized

Old Receivables, net

Liabilities Not Liquidated

Old Current Payables

Multiple Choice Problems

4. d [(P1,110,000 P780,000) + P960,000] P210,000 = P1,080,000

5. b P25,000 + [.30 x (P75,000 P25,000)] = P40,000

6. d (P555,000 P390,000) + P480,000 = P645,000 P105,000 = P540,000

7. b P30,000 + [.30 x (P90,000 P30,000)] = P48,000

8. c [ P110,000 + (P150,000 P110,000) x 40%] = P128,000

10. c P60,000 + [(P120,000 + P6,000) (P30,000 + P35,000) = P121,000

11. b - P20,000 + P80,000 + [P170,000 (P150,000 + P7,000)] = P113,000 (P10,000 +

12. c P93,000/P121,000 = 77% rounded.

14. c - Pension P10,000 + Salaries P35,000 (= P10,600 + P10,950 + P10,950 + P2,500) +

Statement of Realization and Liquidation

Assets Realized..P 1,200,000

Net Gain.. P 425,000

20. P640,000 = P260,000 + [(P50,000 + P100,000) (P500,000 + 30,000), or

Dividend to note holders: P393,580 P530,000 = 74.3%

28. P340,000 = P910,000 P1,250,000

Estimated Unsecured Amount

31. P56,900 refer to No. 30 for computation