Reference no: EM133052009
Question - Miner Company is being forced into bankruptcy. The Company's creditors and stockholders have requested an estimate of the results of liquidation of the Company. Miner's trial balance follows:
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Accounts
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Debit
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Credit
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Cash
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P6,000
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Accounts receivable
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63,000
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Allowance for bad debts
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P2,000
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Notes receivable
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50,000
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Accrued interest on notes receivable
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1,200
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Inventory
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60,000
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Buildings
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182,000
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Accumulated depreciation-Buildings
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63,000
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Equipment
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14,600
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Accumulated depreciation-Equipment
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1,400
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Prepaid insurance
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1,100
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Goodwill
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8,500
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Accrued wages
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6,000
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Taxes payable
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2,400
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Accounts payable and other liabilities
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170,000
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Notes payable
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80,000
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Accrued interest payable
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1,600
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Common stock
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110,000
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Retained earnings (deficit)
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50,000
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Total
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P436,400
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P436,400
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The assets are expected to bring cash on conversion in the following amounts
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Accounts receivable
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P50,000
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Notes receivable including P1,000 accrued interest
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40,800
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Building
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75,000
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Prepaid insurance
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400
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The inventory can be sold for P30,000 and is expected to incur shipping costs and selling expenses amounting to P1,000. Fair market value of the equipment amounted to P4,200.
The notes receivable are pledged as a security on a note payable of P40,000. A note payable of P20,000 is secured by a lien on the building, and the equipment is pledged as security on a note payable of P10,000. One-half of the interest payable relates to P40,000 note payable; the other half of the interest payable relates to the P20,000 note payable. There is no accrued interest on the other notes payable.
Accounts payable and other liabilities include debts, taxes and assessments due to the National Government amounting to P10,000.
The books do not show the estimated trust fees, accounting and legal fees, amounting to P5,000, which will be incurred in connection with the liquidation.
Required - Compute the payment to each class of creditor.
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