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CASE 1:         BANKRUTCY On March 1, 2017, Vinson Stores, Inc. a owner of women’s clothing stores,...

CASE 1:         BANKRUTCY

On March 1, 2017, Vinson Stores, Inc. a owner of women’s clothing stores, was petitioned into involuntary bankruptcy by several creditors under the provisions of Chapter 7 of the Federal Bankruptcy Code.

Assets of the Corporation at that date were as follows:

Cash and cash equivalents                                   $100,000

Accounts Receivable                                              80,000

Inventories                                                               140,000

Computer equipment                                                 55,000

Store equipment                                                      105,000

Land and Buildings                                                250,000

Liabilities:

IRS 2011 Income taxes                                         15,000

Tom Davis (Manager) wages due                                    15,000

Quinn Company account payables                     95,000

City Mall rent for six months                                  30,000

IRS 2013 employment taxes                                20,000

Pension contribution accrued                               30,000

Tom Davis’s part (8,000)

Sysco Systems computers                                    35,000

First National Bank line of credit                           40,000

Note payable on equipment (FNB)                      45,000

Bankruptcy fees                                                      5,000

City Bank mortgage on real property                  165,000

Third National Bank second mortgage              40,000

Other information:

1. Quinn Company filed a proper UCC financing statement covering inventories for $75,000.

2. Inventories were liquidated for 40 cents on the dollar.

3. Sysco Systems filed a proper UCC financing statement on computers for 50,000

4. Computers were in the process of being repossessed by Sysco when bankruptcy was filed . They were valued at $35,000 at the time of repossession.

5. Store equipment, accounts receivable were listed as collateral on a UCC financing statement by First National Bank

6. Accounts receivable were factored for 50% of value.

7. Store equipment was sold for $35,000

8. Buildings and land were sold for $180,000.

Please compute the amount that each creditor is due under a Chapter 7 bankruptcy.

Solutions

Expert Solution

Liabilities: Creditor Due Amount
IRS 2011 Income taxes                                               15,000.00
Tom Davis (Manager) wages due                                           15,000.00
Quinn Company account payables                            39,000.00
City Mall rent for six months                                        30,000.00
IRS 2013 employment taxes                                       20,000.00
Pension contribution accrued                                      30,000.00
First National Bank line of credit                                   5,000.00
Note payable on equipment (FNB)                               5,000.00
Bankruptcy fees                                                              5,000.00
City Bank mortgage on real property                       165,000.00
Third National Bank second mortgage                     40,000.00
Total     369,000.00
Total Available Balance     280,000.00
Working
Value at the time of liquidation Quin Co Sysco Systems First National Bank Due Amount
Cash and cash equivalents                                       100,000.00             100,000.00    100,000.00
Accounts Receivable                                                     80,000.00               40,000.00                   (40,000.00)                    -  
Inventories                                                                   140,000.00               56,000.00     (56,000.00)                    -  
Computer equipment                                                       55,000.00               35,000.00              (35,000.00)                    -  
Store equipment                                                           105,000.00               35,000.00                   (35,000.00)                    -  
Land and Buildings                                                   250,000.00             180,000.00    180,000.00
Liabilities:
IRS 2011 Income taxes                                             15,000.00      15,000.00
Tom Davis (Manager) wages due                                         15,000.00      15,000.00
Quinn Company account payables                          95,000.00     (56,000.00)      39,000.00
City Mall rent for six months                                      30,000.00      30,000.00
IRS 2013 employment taxes                                     20,000.00      20,000.00
Pension contribution accrued                                    30,000.00      30,000.00
Sysco Systems computers                                         35,000.00              (35,000.00)                    -  
First National Bank line of credit                               40,000.00                   (35,000.00)        5,000.00
Note payable on equipment (FNB)                           45,000.00                   (40,000.00)        5,000.00
Bankruptcy fees                                                            5,000.00        5,000.00
City Bank mortgage on real property                   165,000.00    165,000.00
Third National Bank second mortgage                   40,000.00      40,000.00
    730,000.00 535,000.00             446,000.00     (56,000.00)              (35,000.00)                   (75,000.00)    369,000.00

ekkarill92 answered 2 years ago
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