Illustrate hypothetical calculations that would be done to help creditors understand how much money they might receive if the company were to liquidate. Ensure all information is entered accurately. Please refer to the illustration Exhibit 13.2 to view potential calculations.
Exhibit 13.2:
CHAPLIN COMPANY
Statement of Financial Affairs June 30, 2014
Available for Unsecured Creditors
Book Values
Assets
Pledged with fully secured creditors: Land and building.. $231,000
Less: Notes payable (long term) $200,000
Interest payable... $5,000
Pledged with partially secured creditors: Inventory.. $45,000
Less: Notes payable (current) $75,000
Free assets:
Cash
Investment in marketable securities
Dividends receivable
Accounts receivable
Prepaid expenses
Equipment
Intangible assets
Total available to pay liabilities with priority and unsecured creditors
Less: Liabilities with priority (see below in Liabilities)
$210,000
$26,000
$41,000
$0
$2,000
$15,000
$0
$23,000
$3,000
$80,000
$15,000
$2,000
$20,000
$500
$12,000
$1,000
$32,000
$0
$93,500
($36,500)
$57,000
$38,000
$6,000
Available for unsecured creditors
Estimated deficiency
$389,000
Unsecured- Nonpriority Liabilities
Book Values
Liabilities and Stockholders' Equity
Liabilities with priority:
Administrative expenses (estimated).... $21,500
Salaries payable (accrued expenses) $13,000
Payroll taxes payable (accrued expenses) $2,000
Total $36,500
Fully secured creditors
Notes payable $200,000
Interest payable $5,000
Less: Land and building $231,000
$0
Partially secured creditors:
Notes payable $75,000
Less: Inventory ($45,000)
$30,000
Unsecured creditors:
Accounts payable $60,000
Accrued expenses (other than salaries and payroll taxes) $4,000
Stockholders' equity $0
$95,000
$0
$14,000
$0
$200,000
$0
$75,000
$60,000
$4,000
$36,000
$389,000
