Question

In: Accounting

The following balance sheet has been prepared by the accountant for Limestone Company as of June...

The following balance sheet has been prepared by the accountant for Limestone Company as of June 3, 2017, the date on which the company is to file a voluntary petition of bankruptcy:

LIMESTONE COMPANY
Balance Sheet
June 3, 2017
Assets
Cash $ 12,000
Accounts receivable (net) 74,000
Inventory 106,000
Land 109,000
Buildings (net) 309,000
Equipment (net) 198,000
Total assets $ 808,000
Liabilities and Equities
Accounts payable $ 116,000
Notes payable—current (secured by equipment) 268,000
Notes payable—long term (secured by land and buildings) 199,000
Common stock 129,000
Retained earnings 96,000
Total liabilities and equities $ 808,000

Additional Information

  • If the company is liquidated, administrative expenses are estimated at $27,000.
  • The accounts payable figure includes $19,000 in wages earned by the company's 12 employees during May. No one earned more than $3,100.
  • Liabilities do not include taxes of $23,000 owed to the U.S. government.
  • Company officials estimate that 35 percent of the accounts receivable will be collected in a liquidation and that the inventory disposal will bring $89,000. The land and buildings will be sold together for approximately $328,000; the equipment should bring $139,000 at auction.

  • Prepare a statement of financial affairs for Limestone Company as of June 3, 2017.

Solutions

Expert Solution

  • LIMESTONE COMPANY
    Statement of Finacial Affairs
    3-Jun-17
    Book Value Assets Available for Unsecured Creditors
    Pledged with Fully Secured Creditors:
       418,000.00 Land & Buildings     328,000.00
    Less: Notes Payable Long term (199,000.00)            129,000.00
    Pledged with Partially Secured Creditors:
       198,000.00 Equipment     139,000.00
    Less: Notes Payable - Current (268,000.00)                              -  
    Free Assets:
    12,000.00 Cash 12,000.00
    74,000.00 Accounts Receivables               25,900.00
    106,000.00 Inventory               89,000.00
    Total amount available to pay liabilities with priority and unsecured creditors            255,900.00
    Less: Liabilities with priority
       (listed below)    		            (69,000.00)
    Available for Unsecured Creditors            186,900.00
    Estimated Deficiency 39,100
    808,000.00            226,000.00
    Book Value Liabilities and Stockholders' Equity Unsecured - Nonpriority Liabilities
    Liabilities with Priority:
    Administrative Expenses        27,000.00
         19,000.00 Salaries Payable        19,000.00
    Taxes Payable 23,000.00
    Total 69,000.00
    Fully Secured Creditors:
       199,000.00 Notes Payable - Long Term     199,000.00
    Less: Land & Buildings (328,000.00)                              -  
    Partially Secured Creditors:
       268,000.00 Notes Payable Current     268,000.00
    Less: Equipment (139,000.00)            129,000.00
    Unsecured Creditors:
         97,000.00 Accounts Payable (Other than Salaries)               97,000.00
       225,000.00 Stockholders' Equity                              -  
    808,000.00            226,000.00

IF ANY DOUBT PLEASE MENTION IN COMMENT

ekkarill92 answered 3 years ago
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