Reference no: EM132462206
Faced with an inability to meet its current debt payments, The Selbert Company entered bankruptcy on April 30, 2020. The appointed trustee will liquidate the company and pay the creditors in accordance with the provisions of the bankruptcy laws. Selbert's balance sheet on April 30, 2020, following normal GAAP, shows the following:
THE SELBERT COMPANY Balance Sheet April 30, 2020
Assets Liabilities and equity Cash $3,200
Accounts payable $131,900
Accounts receivable 71,000
Loan payable to bank 60,000
Notes receivable 50,000
Notes payable to suppliers 83,900
Inventories 108,600
Accrued wages 94,700
Prepaid expenses 17,200
Accrued taxes 70,000
Land and buildings, net 172,000
Mortgage payable 195,000
Equipment, net 113,500
Common stock 100,000
Goodwill, net 28,000
Retained earnings (172,000)
Total assets $563,500
Total liabilities and equity $563,500
Additional information:
1. The trustee estimates that 60 percent of the accounts receivable will be collected, and she has agreed to settle the notes receivable for $42,500. The notes receivable serve as collateral for the loan payable to the bank.
2. The inventories will likely be sold to a competitor, at 40 percent of book value.
3. Other than a $2,000 insurance refund, no recovery of prepaid items is expected.
4. Appraised at $300,000, the land and buildings are pledged as security on the mortgage.
5. The equipment is expected to be sold for $40,000.
6. The notes payable to the suppliers are unsecured.
7. Accrued wages do not exceed statutory limits per employee.
Required Compute the following:
Question a. Estimated net loss on asset dispositions.
Question b. Amount of priority claims.
Question c. Estimated payments to fully and partially secured creditors.
Question d. Expected recovery percentage to unsecured creditors.