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Advanced Accounting Part 1

Multiple Choice Problem

1.) Suggested answer is P400,000 x 40%.


The question is on the Sand Statement of Affairs (individual) and not in consolidated fi

2.) Total assets


Stockholders equity
Liabilities
Total assets
Less: Loss on realization of assets
Free assets - Cash available

Free assets
Less: Liabilities with priority
Net free assets

ERR = 76,500 / 90,000

3.) C - secured claim of P90,000 and an unsecured claim of P10,000

4.) Free assets


Add: Free assets in asset pledged to fully secured creditors
Current value of the pledged asset
Amount of liability
Total free assets
Less: Liabilities with priority
Cash available for unsecured creditors without priority

5.) Liquidating value of asset pledged


Add: Recovery on the unsecured portion
Unsecured portion
Multiply by: ERR
Cash received by Carson as recovery of his note

6.) Free assets


Add: Free assets in asset pledged to fully secured creditors
Current value of the pledged asset
Amount of liability
Total free assets
Less: Liabilities with priority
Cash available for unsecured creditors without priority

7.) Liquidating value of asset pledged


Add: Recovery on the unsecured portion
Unsecured portion
Multiply by: ERR
Cash received by Arrow as recovery of his note

8.) Liquidating value of asset pledged


Add: Recovery on the unsecured portion
Unsecured portion
Multiply by: ERR
Cash received by Bailey as recovery of his note

9.) D - all of the above would occur

10.) Total amount of unsecured claims


Unsecured claims with priority
Wages and taxes
Taxes payable
Unsecured claims without priority
Accounts payable
Unsecured portion of Notes payable
Notes payable plus interest
Less: Fair value of the pledged assets
Total amount of unsecured claims

Note: Since there is no P141,000 amount the choices I will choose letter C - unsecured

11.) Free assets


Cash
Equipment
Add: Free assets in asset pledged to fully secured creditors
Current value of the pledged asset
Bonds payable
Total free assets - available for unsecured creditors
Less: Liabilities with priority
General unsecured creditors - net free assets

12.) Unsecured creditors without priority


Accounts payable
Unsecured portion of partially secured creditors
Amount of liabilities
Less: Fair value of the pledged assets
Total Unsecured creditors without priority

ERR = 93,000 - refer to no. 11 / 121,000


13.) A = Fully Secured Creditors P 300,000 ; Creditors with Priority P 140,000

14.) Estimated liabilities with priority


Pension 10,000
Salaries 75,000
Taxes Payable 80,000
Estimated liquidation expenses 40,000
Liabilities with priority 205,000

Note:
I will answer P170,000 if the payable to officer amounted to P35,000 is a non-trade pa
an employee), otherwise, my answer is P205,000 because an officer of a corporation is

Questions 15 to 26
Computation of Unsecured liabilities with and without priority
Due

Accounts payable - partially secured 50,000


Accounts payable 40,625
Wages payable 3,775
Other accrued liabilities 10,000
Notes payable - fully secured 10,375
Mortgage payable - fully secured 70,600
Total unsecured creditors with and without priority - (Free assets)

Computation of Free assets, Net free assets and expected recovery rate

Cash
Accounts receivable
Notes receivable
Inventory and Equipment
Investment in Calandir Stock
Land and Building
Total free assets
Less: Liability with priority
Net free assets

Expected recovery rate or dividend rate (56,900 / 72,625)

15.) Compute the estimated amount available to unsecured creditors (with and without priority)/total

Cash received:
Unsecured creditors with priority
Unsecured creditors without priority (72,625 * 78.35%)
Total cash received by unsecured claims ( Total free assets)

16.) Compute the estimated amount available to unsecured creditors without priority / net free assets

Unsecured creditors without priority (72,625 * 78.35%) / net free assets

Computation of recovery for each class of creditors

Fully secured creditors


Partially secured creditors
Unsecured creditors with priority
Unsecured creditors without priority
Total

Total assets measured at Net realizable value


Pledged assets
Free assets
Total

17.) Compute the amount of unsecured creditors without priority


18.) Compute the dividend to unsecured creditors without priority
19.) Compute the estimated payment to fully secured creditors
20.) Compute the estimated amount to partially secured creditors
21.) Compute the estimated amount to unsecured creditors with priority
22.) Compute the estimated amount to unsecured creditors without priority
23.) Compute the estimated payment to creditors
24.) Compute the estimated deficiency to unsecured creditors (100%-78.35%)
25.) Compute the estimated gain or loss on realization of assets

Gain on realization of assets


Loss on realization of assets

Carrying value
Cash 1,850
Accounts receivable 21,200
Notes receivable 15,000
Inventory and Equipment 84,000
Investment in Calandir Stock 5,800
Land and Building 98,500
Balances

26.) Compute the estimated net loss

Questions 27 to 32
27.) Compute the cash balance on June 30, 20x5

Cash balance beg


Add: Cash proceeds from realization of assets
Calandir securities
Note receivable
Equipment
Inventories
Total
Less: Payments
Accounts payable
Note payable
Cash balance - ending ( June 30, 20x5 )

28.) Compute the noncash assets June 30, 20x5

Accounts receivable
Land and Building
Noncash assets balance - June 30, 20x5

Note: I suggest you answer the question using book value - recorded values in

Determine balances as of June 30, 20x5


29.) Compute the balance of fully secured creditors - decrease
30.) Compute the balance of partially secured creditors

Note: My suggested answer is P0 because all assets attached to the liability were so

31.) Compute the balance of liabilities with priority

32.) Compute the balance of liabilities without priority


Due
Accounts payable - partially secured 50,000
Accounts payable 40,625
Other accrued liabilities 10,000
Balance

33.) Statement of Realization and Liquidation


Assets to be realized 1,375,000
Assets acquired 750,000
Liabilities Liquidated 1,875,000
Liabilities not liquidated 1,700,000
Supplementary charges/debits 3,125,000
Balance 8,825,000
Gain 425,000
Total 9,250,000

Alternative solution:
Gain or (Loss) on assets
Assets realized
Assets not realized
Total asset accounted for
Less: Accountability
Less: Assets to be realized
Assets acquired

Gain or (Loss) on liabilities


Liabilities to be liquidated
Liabilities assumed
Total Accountability
Less: Total liabilities accounted for
Liabilities liquidated
Liabilites not liquidated

Net gain (loss)


Supplementary credits
Supplementary charges/debits
Gain

34.) Equity, net of deficit


Add: Liabilities not liquidated
Total assets
Less: Assets not realized
Cash balances ending

How much is the cash beginning balance? Just in case they will ask.

Cash ending balance


Add back: Total payments
Liabilities liquidated
Payments made for supplementary charges/debits
Supplementary charges/debits
Less: Liabilities assumed
Total
Less: Total collections or increase in cash during the period
Assets realized
Collections from supplementary credits
Supplementary credits
Less: Assets acquired
Cash beginning balance
160,000 C
vidual) and not in consolidated financial statement.

36,000
100,000
136,000
45,000
91,000

91,000
14,500
76,500

85% A

f P10,000

960,000

1,110,000
780,000 330,000
1,290,000
210,000
1,080,000 D

25,000

50,000
0.30 15,000
40,000 B

480,000

555,000
390,000 165,000
645,000
105,000
540,000 D

30,000
60,000
0.30 18,000
48,000 B

110,000

40,000
0.40 16,000
126,000 C

10,000
10,000 20,000

60,000

126,000
65,000 61,000 121,000
141,000 suggested answer

will choose letter C - unsecured creditors without priority

20,000
80,000 100,000

170,000
157,000 13,000
113,000 B
20,000
93,000 B

60,000

126,000
65,000 61,000
121,000

77% C
Priority P 140,000

ted to P35,000 is a non-trade payable (not serivce rendered as


use an officer of a corporation is an employee.

Pledged assets Unsecured liability Unsecured liability


(NRV) without Priority with Prioirity
28,000 22,000
- 40,625
3,775
10,000
15,000 -
92,800 -
72,625 3,775 76,400

recovery rate
Realizable value Pledged assets Free assets
1,850 - 1,850
17,000 - 17,000
15,000 - 15,000
28,000 28,000 -
15,000 10,375 4,625
92,800 70,600 22,200
60,675
3,775
56,900

78.35%

tors (with and without priority)/total free assets 60,675

3,775
5 * 78.35%) 56,900
l free assets) 60,675

tors without priority / net free assets 56,900

%) / net free assets 56,900

Percentage of
Claims Recovery
recovery
80,975 80,975 100.00%
50,000 45,236 90.47%
3,775 3,775 100.00%
50,625 39,664 78.35%
185,375 169,650

108,975
60,675
169,650

56,900
78.35%
80,975
45,236
3,775
ut priority 39,664
169,650
0%-78.35%) 21.65%

9,200
(65,900)

Realizable value Gain Loss Net gain


1,850
17,000 (4,200) (4,200)
15,000
28,000 (56,000) (56,000)
15,000 9,200 9,200
92,800 (5,700) (5,700)
9,200 (65,900) (56,700)

(56,700)
1,850

16,000
15,000
7,000
22,000 60,000
61,850

29,000
10,375 39,375
22,475

Realizable value Book Value


17,000 21,200
92,800 98,500
119,700

book value - recorded values in the book of the corporation

70,600
0

attached to the liability were sold and paid to creditor

3,775

Paid Balance
29,000 21,000
- 40,625
10,000
71,625

Assets realized 1,200,000


Assets not realized 1,375,000
Liabilities to be liquidated 2,250,000
Liabilities assumed 1,625,000
Supplementary credits 2,800,000
Balance 9,250,000
Total 9,250,000

1,200,000
1,375,000
2,575,000

1,375,000
750,000 2,125,000 450,000

2,250,000
1,625,000
3,875,000

1,875,000
1,700,000 3,575,000 300,000

2,800,000
3,125,000 (325,000)
425,000

1,000,000
1,700,000
2,700,000
1,375,000
1,325,000

they will ask.

1,325,000

1,875,000

3,125,000
1,625,000 1,500,000 3,375,000
4,700,000

1,200,000

2,800,000
750,000 2,050,000 3,250,000
1,450,000