when aaa company filed for liquication with the securities and exchange commission it prepared t

Step 1: Calculate the free assets by subtracting the secured liability (mortgage payable) from t

When aaa company filed for liquication with the securities...

When AAA Company filed for liquidation with the Securities and Exchange Commission, it prepared the following statement of financial position: Current Assets (net realizable value, PSO, CCO) $80,000 Land and Building (fair value, $240,000) $200,000 Goodwill (fair value, $0) $4,000 Total Assets $320,000 Accounts Payable $160,000 Mortgage Payable (secured by land & building) $200,000 Ordinary Share $100,000 Accumulated Profits $40,000 Total Liability and Equity $320,000 What percentage of their claims are the unsecured creditors likely to get?

Transcript

00:01 Hello, in this video we're going to solve for the percentage of claims that our unsecured creditors were likely to get.

00:19 So how do we solve for this? you just need to divide the net realizable value of your free assets.

00:33 Free assets are those assets that are of course free and they are.

00:39 Clear to cover any obligations or any liabilities divide that one by the book value of your unsecured liabilities meaning those liabilities that are not collateralized not secured okay so let us determine first our free assets so in the given problem we have current assets and let us look for the net realizable value okay so current assets current assets the net realizable is 50 ,000 we have the land and building land and building with a fair value of 240 ,000 always choose the fair value figure we have a goodwill but with zero fair value.

01:58 So we have a total asset of that's 50 plus 240 and you get 290 ,000.

02:12 But this again, these 290 ,000 is the net realizable value of your total assets.

02:24 But consider the mortgage payable, which is a lot of your total assets.

02:28 A secured liability because it is secured by the land and building so the amount of the payable is 200 ,000 we deduct that one by our by the net realizable of our total assets since we're looking for our free assets which is those assets there are free from any obligations so since we have a mortgage payable which is secured by our land and building so we need to subtract that one from our total assets so that we will just get and filter those assets that are free this is your free assets the amount of 90 ,000 i'm sorry, $90 ,000.

03:28 So we now have our free assets, the not realizable, the amount of $90 ,000...

Question

Please give Ace some feedback