Reference no: EM131644891
Answer and explain the following. Show your work.
Alshon Corporation is to be liquidated under Chapter 7 of the Bankruptcy Code. The balance sheet on July 31 20x7 is below
Assets:
Cash $4,000
Marketable Securities $20,000
Accounts Receivable (net) $75,000
Inventory $90,000
Prepaid Insurance $ 6,000
Land $50,000
Plant and Equipment (net) $250,000
Franchises $48,000
Total $543,000
Equities:
Accounts Payable $120,000
Wages Payable $13,000
Taxes Payable $20,000
Interest Payable $25,000
Notes Payable $125,000
Mortgages Payable $150,000
Common Stock ($5 par) $180,000
Retained Earnings (deficit) ($90,000)
Total $543,000
The following additional information is available:
1. Marketable securities consist of 2,000 shares of Bristol Inc. common stock. The market value per share of the stock is $8. The stock was pledged against a $20,000, 8 percent note payable that has accrued interest of $800.
2. Accounts receivable of $40,000 are collateral for a $35,000, 10 percent note payable that has accrued interest of $3,500.
3. Inventory with a book value of $35,000 and a current value of $32,000 is pledged against accounts payable of $60,000. The appraised value of the remainder of the inventory is $50,000.
4. Only $1,000 will be recovered from prepaid insurance.
5. Land is appraised at $65,000 and plant and equipment at $160,000.
6. It is estimated that the franchises can be sold for $15,000.
7. All the wages payable qualify for priority.
8. The mortgages are on the land and on a building with a book value of $110,000 and an appraised value of $100,000. The accrued interest on the mortgages is $7,500.
9. Estimated legal and accounting fees for the liquidation are $10,000.
Required:
a. Prepare a statement of affairs as of December 31, 2016.
b. Compute the estimated percentage settlement to unsecured creditors.
c. Answer and explain the following. Show your work.