Statement of Realization and Liquidation Comfort Mattress Corporation, a retaile

Question

Statement of Realization and Liquidation
Comfort Mattress Corporation, a retailer, decided to liquidate in the face of an extreme cash shortage. By agreement with creditors, a receiver was appointed to manage the liquidation. Upon appointment, the receiver found the company's financial condition to be as follows:

From March 17 through June 30, the following occurred:

1. Collected accounts receivable of $80,000; the remaining accounts are deemed to be uncollectible.
2. Held a ''going out of business sale.'' Sold inventory costing $310,000 for $298,000. Paid expenses of conducting the sale, amounting to $75,000.
3. Sold the remaining inventory to a liquidator for $60,000.
4. The receiver terminated the store's lease; the lease provides for a termination penalty of $25,000, which was accrued.
5. Sold the store fixtures at auction for a net of $40,000.
6. Accrued the receiver's fee of $50,000.
7. Paid the secured creditors to the extent of the realized value of their security.

Required

a. Prepare a statement of realization and liquidation as of June 30, 2016.

b. Compute the remaining cash and determine how it is disbursed, assuming no further expenses.

Do not use any negative signs with your answers below. Round answers to the nearest dollar, when appropriate.

COMFORT MATTRESS CORPORATION Balance Sheet March 17, 2016 Cash $15,000 Accounts Payable $485,000 Accounts receivable 120,000 Loan payable (secured by inventory) 225,000 Inventory of merchandise 500,000 Notes payable (secured by fixtures) 60,000 Store fixtures, net 150,000 Stockholders' equity 15,000 Total assets $785,000 Total liabilities and equity $785,000

Explanation / Answer

Comfort Mattress Corporation Statement of Realization and Liquidation For the Period March 17 through June 30, 2016 Assets to be realized: Assets realized: Accounts receivable 120000 Accounts receivable 80000 Inventory 500000 Inventory 283000 Store fixtures 150000 770000 Store Fixtures 40000 403000 Assets acquired: Assets not realized: None -- None -- Liabilities liquidated: Liabilities to be liquidated: Loan payable 225000 Loan payable 225000 Note payable 40000 265000 Note payable 60000 Accounts payable 485000 770000 Liabilities not liquidated: Liabilities incurred: Account payable 485000 Lease termination 25000 Note payable 20000 Receiver's fee 50000 75000 Lease termination 25000 Receiver’s fee 50000 580000 Gain on realization Loss on realization Inventory 0 Accounts receivable 40000 Inventory 217000 Store fixtures 110000 367000 1615000 1615000 Balance of cash available: Balance, March 17 15000 Increases: Collections of receivables 80000 Sales of inventory 358000 Auction of store fixtures 40000 478000 Decreases: Expenses of sale 75000 Payment of loan 225000 Payment of note 40000 340000 Balance, June 30 153000 Cash available 153000 Less: Liabilities with priority Receiver's fee 50000 Available for unsecured creditors 103000 Amount Expected Recovery Unsecured creditors: Accounts payable 485000 94255 Notes payable 20000 3887 Lease termination 25000 4858 530000 103000 Hint: Expected recovery = the amount of the unsecured liability x [(Amount available for unsecured creditors) / (Total unsecured liabilities)].

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

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