Oregon Corporation has filed a voluntary petition to reorganize under Chapter 11
ID: 2460001 • Letter: O
Question
Oregon Corporation has filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Reform Act. Its creditors are considering an attempt to force liquidation. The company currently holds cash of $9,000 and accounts receivable of $28,000. In addition, the company owns four plots of land. The first two (labeled A and B) cost $11,000 each. Plots C and D cost the company $23,000 and $28,000, respectively. A mortgage lien is attached to each parcel of land as security for four different notes payable of $18,000 each. Presently, the land can be sold for the following:
Plot A $ 19,000 Plot B $ 14,000 Plot C $ 17,000 Plot D $ 33,000
Another $21,000 note payable is unsecured. Accounts payable at this time total $38,000. Of this amount, $10,000 is salary owed to the company's workers. No employee is due more than $3,700. The company expects to collect $15,000 from the accounts receivable if liquidation becomes necessary. Administrative expenses required for liquidation are anticipated to be $26,220.
a. Prepare a statement of financial affairs for Oregon Corporation.
b. If the company is liquidated, how much cash would be paid on the note payable secured by plot B?
c. If the company is liquidated, how much cash would be paid on the unsecured note payable?
d. If the company is liquidated and plot D is sold for $35,700, how much cash would be paid on the note payable secured by plot B?
Explanation / Answer
a.
Prepare a statement of financial affairs for Oregon Corporation:
Details
Amount
Amount
Add:
Cash in hand
$ 9,000
Accounts receivable
$ 15,000
Sale of land:
Plot A
$ 19,000
Plot B
$ 14,000
Plot C
$ 17,000
Plot D
$ 33,000
$ 107,000
Less:
Liquidation expenses
$ (26,220)
Notes payable against secured assets
$ (72,000)
Notes payable against Unsecured assets
$ (21,000)
Salary owed
$ (10,000)
$ 129,220
Balance
$ (22,220)
b.
If the company is liquidated, how much cash would be paid on the note payable secured by plot B:
Company paid the amount of $14,000 against notes payable for secured mortgage of Plot-B.
c.
If the company is liquidated, how much cash would be paid on the unsecured note payable:
If the Company is liquidated, company has receipts against sale of assets $107,000. This amount paid against these following liabilities. Amount was not paid to Unsecured Notes payable.
Details
Amount
Secured Notes payable
$ 72,000
Liquidation expenses
$ 26,220
Salary payable (actual exp : $10,000)
$ 8,780
Total
$ 107,000
d.
If the company is liquidated and plot D is sold for $35,700, how much cash would be paid on the note payable secured by plot B:
The company paid notes payable against the plot B is paid $16,700 when the company liquidated and plot is sold for $35,700.
Details
Amount
Amount
Add:
Cash in hand
$ 9,000
Accounts receivable
$ 15,000
Sale of land:
Plot A
$ 19,000
Plot B
$ 14,000
Plot C
$ 17,000
Plot D
$ 33,000
$ 107,000
Less:
Liquidation expenses
$ (26,220)
Notes payable against secured assets
$ (72,000)
Notes payable against Unsecured assets
$ (21,000)
Salary owed
$ (10,000)
$ 129,220
Balance
$ (22,220)
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