Kimber Co. is in the process of liquidating and going out of business The firm\'

Question

Kimber Co. is in the process of liquidating and going out of business The firm's accountant has prove the following balance sheet and additional information It is estimated that all but 18 percent of the accounts receivable can be collected and that the merchandise inventory can be disposed of in a liquidation sale for 90 percent of its cost Buildings at equipment can be sold at $40, 000 above book value (the difference between original cost and depreciation shown on the balance sheet), and the land can be sold at its current appraisal value of $64,000 In addition to the liabilities included m the balance sheet. $2,460 is owed to employees for work since the last pay period. and interest of $5,060 has accrued on notes payable and long-term Calculate me amount of cash that be available to the stockholders if the accounts receivable collected, the other assets are sold as described, and all liabilities and other claims are paid in ful

Explanation / Answer

Solution:

Calculation of gains or losses for the sale (or collection) of each of Kimber Co's non cash assets:

Book value of Building & Equipment = 347,000 - 192,500 = 154,500

The amount of cash available to pay the claims of creditors and stockholders:

= Cash received from liquidation + Beginning cash balance

= 416,900 + 19,000

= 435,900

Liabilities would be paid first (including the amounts that are not shown on the balance sheet), and the balance would be paid to the stockholders:

The total cash available to stockholders upon liquidation can be verified, as follows:

Cash received upon
sale or collection of asset Gain or (loss) recorded
and effect on owners equity Accounts receivable 63,000 * 90%                                        56,700 63,000 * 10%                                               (6,300) Merchandise inventory 113,000 * 90%                                      101,700 113,000 * 10%                                            (11,300) Building & Equipment (347,000 - 192,500) + 40,000                                      194,500 Amount above BV                                               40,000 Land Appraised Value                                        64,000 64,000 - 47,000                                               17,000 Total cash received                                      416,900                                               39,400

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.