Reference no: EM132705015
Rainy Co.'s financial position before its liquidation is as follows:
ASSETS LIABILITIES AND EQUITY
Cash 100,000 Accounts Payable 1,600,000
Accounts Receivable 600,000 Loan Payable 1,500,000
Inventory 900,000 Share capital 2,000,000
Equipment, net 400,000 Retained earnings(deficit) (3,100,000)
Total 2,000,000 Total 2,000,000
Transactions in the first quarter of liquidation are as follows:
- 90% of they accounts receivable were collected. Commission of third party collectors amounted to P108,000. The collectors expect to collect the remaining receivables in the next quarter.
- Half of the inventory was sold at 80% of carrying amount. The other half is expected to be sold at 60% of carrying amount.
- The equipment was sold for P380,000 after it was refurbished for P50,000
- P100,000 accounts payable were paid.
- Employee termination benefits of P100,000 were recorded and P80,000 of that amount were paid.
- The lender accepted P1,000,000 as full payment of the loan.
- Liquidation costs of P50,000 were paid.
- Scrap materials from clearing the warehouse were sold for P10,000
Problem 1: How much "assets realized" is presented on Rainy's statement of realization and liquidation?
A. 1,122,000 C. 1,312,000
B. 1,212,000 D. 1,321,000
Problem 2: How much net gain(lose) is reported on Rainy's statement of realization and liquidation?
A. 178,000 C. 192,000
B. (178,000) D. (192,000)
Problem 3: How much is the ending balance of cash
A. 1,800 C. 5,000
B. 2,000 D. 0