Reference no: EM132728645
FAREX Corporation has been experiencing financial difficulties for a long time and to avoid future losses, the company decided to liquidate. The trustee appointed by the Securities and Exchange Commission gathered the following information:
Cash P 321,000
Salaries and wages payable P 24,000
Notes receivable 1,200,000
Notes payable 3,000,000
Accounts receivable, net 2,610,000
Accrued interest 48,000
Merchandise inventory 2,400,000
Accounts payable 4,080,000
Prepaid insurance 30,000
Ordinary shares 3,000,000
Furniture and fixtures, net 240,000
Share premium 300,000
Delivery equipment, net 1,080,000
Deficit (1,071,000) Goodwill 1,500,000
Total liabilities and shareholders'
Total assets P 9,381,000
equity P 9,381,000
- Only ¾ of the notes receivable and P1,950,000 of the accounts receivable are expected to be collectible.
- The fair value of merchandise inventories is estimated at 75% of book value.
- The delivery equipment can be realized at P840,000.
- Furniture and fixtures have fair values of P30,000 more than the book value.
- Notes payable of P850,000 with accrued interest of P27,000 is secured by the delivery equipment.
- Merchandise inventories with a book value of P1,800,000 secure 40% of the notes payable with related accrued interest of P12,000.
- FAREX incurred taxes of P120,000 and liability to trustee of P400,000.
Problem 1: How much is the net free assets?
Problem 2: How much is the estimated deficiency to unsecured creditors?
Problem 3: What is the estimated net gain/loss on realization of assets?
Problem 4: How much is the estimated payment to partially secured creditors?
Problem 5: What is the estimated recovery percentage for unsecured without priority liabilities?
Problem 6: What is the estimated recovery percentage for partially secured liabilities?