Auditing Theory and Principles Thanks Guys

1 The unsecured creditors of Kaladkaren Corporation filed a petition on July 1, 2019 to force Kaladkaren Corporation into b
granted on July 10 at which time an interim trustee was appointed to supervise liquidation of the estate. A listing of asse
as of July 10, 2019, along with estimated realizable values, is as follows:
Assets Book Value

Cash P 61,400.00
Accounts receivable 250,000.00
Allowance for Doubtful Account (20,000.00)
Inventories 420,000.00
Prepaid expenses 40,000.00
Investments 180,000.00
Land 210,000.00
Buildings (net) 260,000.00
Machinery and equipment (net) 220,000.00
Goodwill 200,000.00
Total Assets P 1,821,400.00
Liabilities and Equity

Accounts payable P 670,000.00
Wages payable 3,400.00
Notes payable 160,000.00
Accrued interest – notes 5,000.00
Mortgage payable, secured by land and buildings 400,000.00
Capital Stock 800,000.00
Additional paid-in Capital 80,000.00
Deficit (297,000.00)
Total Liabilities and Equity 1,821,400.00
Additional information:
· Patents completely written-off the books in the past years but with a realizable value of P10,000.
· The books do not show the following accruals (unrecorded expenses/additional liabilities):
Taxes 16,400.00
Interest on mortgage 10,000.00
· The investment has been pledged as security for holder of the notes payable
· The trustee fees and other costs of liquidation the estate are estimated to be P60,000.
ANSWERED USING STATEMENT OF AFFAIRS
KALADKAREN CORPORATION
Statement of Affairs
July 10, 2019
Book Value Assets
Assets Pledged to Fully Secured Creditors:
P 470,000.00 Land and Building
Less: Liabilities to Fully Secured Creditors
Mortgage Payable
Interest Payable on Mortgage
Assets Pledged to Partially Secured Creditors:

P 180,000.00 Investment
Free Assets:
P 61,400.00 Cash
230,000.00 Account Receivable
420,000.00 Inventories
40,000.00 Prepaid expenses
220,000.00 Machinery & Equipment
200,000.00 Goodwill
- Additional assets/unrecorded assets: Patent
Total Free Assets:
Less: Unsecured Liabilities with Priority
Net Free Assets
Estimated Deficiency to Unsecured Creditors
P 1,821,400.00 Total
Book Value Liabilities and Equity

Fully Secured Creditors:
P 400,000.00 Mortgage Payable
Interest Payable on Mortgage
Partially Secured Creditors:

P 160,000.00 Notes Payable
5,000.00 Interest on Notes
Less: Assets pledged to Partially Secured Creditors
Investments
Unsecured Creditors with Priority:

P 3,400.00 Wages Payable
Taxes Payable
Administrative Expense
Unsecured Creditors without Priority:

P 670,000.00 Accounts Payable
Stockholder's Equity
P 800,000.00 Capital Stock
80,000.00 Additional Paid-in Capital
(297,000.00) Deficit
P 1,821,400.00 Total
Estimated Amounts to be Recovered by Cred
(Date)
Class of Creditors: Amount of

Claims
Fully Secured 410,000.00
Partially Secured 165,000.00
Unsecured with Priority 79,800.00
Unsecured without Priority 670,000.00
TOTAL 1,324,800.00
To Compute Est. Payment Recovery for Partially Secured Creditors
Partially Secured Creditor

Less: Assets Pledged
Unsecured Portion
Est. Recovery Percentage for General Unsec Creditors
Amount Paid for Unsec. Portion
To compute for Unsecured without priority

Accounts Payable
Unsecured claims Paid
ANSWERED USING STATEMENT OF REALIZATION AND LIQUIDATION
Statement of Realization and Liquidation
For the month ended, (date)
Estate Deficit, Beginning
Assets Realized:
Realization Proceeds Current Fair Values
Cash P 61,400.00
Accounts Receivable - Net 212,500.00
Prepaid expenses -
Land and Building 500,000.00
Goodwill P -
Patent 10,000.00
Total P 1,237,800.00
Liquidated:
Payment
Notes payable & Interest 158,400.00
Mortgage payable & Interest 400,000.00
Interest on Mortgage 10,000.00
Income Tax Payable 16,400.00
Anticipated Liquidation Exp 60,000.00
Total P 1,237,800.00
Estate Deficit, End
Assets To Be Realized:
Accounts Receivable - P 230,000.00
Prepaid expenses 40,000.00
Goodwill 200,000.00
Assets Acquired:
Patent P 10,000.00
Liabilities Liquidated:
Mortgage payable 400,000.00
Interest Expense on MP 10,000.00
Liabilities Not Liquidated:

Accounts Payable P 80,400.00
Notes Payable and Interest 6,600.00
Supplementary Debits/Charges:
Liquidation Expense P 60,000.00
Interest on Mortage 10,000.00
Taxes 16,400.00
Net Gain (to balance) P
TOTAL P 3,104,800.00
ANSWERS:
1. Total free assets 717,800.00
2. Net free assets 638,000.00
3. Estimated deficiency to unsecured creditors (87,000.00)
4. Expected recovery percentage of unsecured creditors 88.00%
5. Estimated payment to creditors:
a. Fully secured 410,000.00
b. Partially secured 158,400.00
c. With priority 79,800.00
d. Without priority 589,600.00
6. Estimated payment to creditors 1,237,800.00
7. Estimated net gain or loss on asset realization 583,600.00
8. Estimated net loss 670,000.00
orce Kaladkaren Corporation into bankruptcy. The court order for relief was
ation of the estate. A listing of assets and liabilities of Kaladkaren Corporation
Estimated Realizable Values

P 61,400
15% of the accounts receivable is estimated to be uncollectible
Estimated selling price, P340,000 which will require additional costs of 50,000
?
110,000
An offer of P500,000 has been received for land and buildings
53,900
?
alue of P10,000.
July 10, 2019
Estimated Realizable Value Free Assets
P 500,000.00
400,000.00
10,000.00 P 90,000.00
P 110,000.00
P 61,400.00
212,500.00 Dyan Nicole M Francis
We use lower of Cost or
290,000.00
To compute for NRV: Est
- Cost is 420,000
53,900.00 NRV is 290,000 = 34000
-
10,000.00 P 627,800.00
P 717,800.00
P 79,800.00
P 638,000.00
P (87,000.00)
P 725,000.00
Creditor's Claim Unsecured Liabilities

Dyan Nicole M Francisco:
P 400,000.00 Always remember that interest follows the principal
10,000.00
P 160,000.00
5,000.00
110,000.00 P 55,000.00
P 3,400.00
16,400.00
60,000.00
670,000.00 P 670,000.00
P 725,000.00
ed Amounts to be Recovered by Creditors
(Date)
Estimated Payment
Recovery Percentage of Recovery
410,000.00 100%
158,400.00 96.00%
79,800.00 100%
589,600.00 88.00%
1,237,800.00
tially Secured Creditors Dyan Nicole M Francisco:

Note that this amount should be equal to
Total Amount Paid the total Estimated Realizeable Value of
165,000.00 Assets
110,000.00 110,000.00
55,000.00
88.00%
48,400.00 48,400.00
158,400.00
670,000.00
88.00%
589,600.00
tement of Realization and Liquidation
P (583,000.00)
Current Fair Values Loss or (Gain)

61,400.00 -
230,000.00 17,500.00
420,000.00 130,000.00
40,000.00 40,000.00
180,000.00 70,000.00
470,000.00 (30,000.00)
220,000.00 166,100.00
200,000.00 200,000.00
- (10,000.00)
1,821,400.00 583,600.00 P 583,600.00
Book Value Loss or (Gain) Dyan Nicole M Francisco:
670,000.00 -
Assumed that the difference be
3,400.00 - book value are the amounts th
165,000.00 - so no gain/loss should be recog
400,000.00 -
the only gains or losses to be r
- 10,000.00 supplemental credit/charges an
- 16,400.00
- 60,000.00
1,238,400.00 P 86,400.00
P 87,000.00
tement of Realization and Liquidation
Assets Realized:
Accounts Receivable - Net P 212,500.00
Prepaid expenses -
Goodwill -
Patent 10,000.00
Assets Not Realized:
P -
Liabilities to be Liquidated:
Mortgage payable 400,000.00
Liabilities Assumed:
Interest Expense on Mortgage Payable P 10,000.00
Supplementary Credits:
Patent - Gain P 10,000.00
Net Loss (to balance) P 670,000.00 Dyan Nicole M Franci

Note that this amount is
estumated net loss on th
deficiency above.
Dyan Nicole M Franci
TOTAL P 3,104,800.00 Note that this amount is
estumated net loss on th
deficiency above.
NOTE:
All identifiable non-cash assets are assumed to have zero net realizable value
ONLY IF SILENT in corporate liquidation, because you are in a quitting concern
assumption.
Goodwill is automatically zero, It is only possible to realize goodwill under

business combination or acquisition transactions. (PFRS 3)
ONLY IF SILENT in corporate liquidation, because you are in a quitting concern
assumption.
Goodwill is automatically zero, It is only possible to realize goodwill under

business combination or acquisition transactions. (PFRS 3)

We use lower of Cost or NRV
To compute for NRV: Est. Selling price Less Cost to Sell Less Cost to complete
Cost is 420,000
NRV is 290,000 = 340000-50000
rancisco:
that interest follows the principal
Estimated Recovery Percentage of Unsecured Creditor Without Priority
Estimated
Net Free Assets Recovery
=
Total Unsecured Creditors Without Priority Percentage
638,000.00
= 88.00%
725,000.00
Deficiency Statement
(Date)
Estimated Losses on Realization of Assets:
Accounts Receivables P
Inventories
Prepaid expenses
Investments
Machinery and equipment (net)
Goodwill
Additional Liabilities:
Taxes Payable
Interest Expense on Mortgage Payable
Estimated Liquidation Expense

Estimated Gross Loss P
Less:
Estimated Gains on Realization of Assets:
Land and Building P
Additional Assets:
Patents
Estimated Net Loss P
Less:
Loss to be absorbed by Stockholders:
Capital Stock 800,000.00
Additional Paid-in Capital 80,000.00
Deficit (297,000.00)
Estimated Deficiency to unsecured creditors P
Assumed that the difference between the payment and

book value are the amounts that are not yet liquidated,
so no gain/loss should be recognized
the only gains or losses to be recognized are those from

supplemental credit/charges and additional liabilities

Note that this amount is equivalent to the
estumated net loss on the statement of
deficiency above.
Note that this amount is equivalent to the
estumated net loss on the statement of
deficiency above.
17,500.00
130,000.00
40,000.00
70,000.00
166,100.00
200,000.00
(30,000.00)
16,400.00
10,000.00
60,000.00
710,000.00
30,000.00
10,000.00
670,000.00
583,000.00
87,000.00
2 Catriona Grey Co. filed for a voluntary petition for bankruptcy on January 2020. On March 31, 2016, the trustee provided
Assets Book Value
Cash 36,000.00
Accounts Receivables-net 180,000.00
Plant Assets – net 450,000.00
Total Assets 936,000.00
Liabilities Book Value

Liabilities for Priority Claims 144,000.00
Accounts payable – unsecured 270,000.00
Notes payable, secured by Accounts receivables 180,000.00
Mortgage payable, secured by all plant assets 396,000.00
Total Liabilities 990,000.00
*Estimated Deficiency (Balancing Figure) (54,000.00)
CATRIONA GREY CO.

March 31, 2016
Book Value Assets
P 450,000.00 Assets Pledged to Fully Secured Creditors:
Plant Assets - Net
Mortgage Payable

P 180,000.00 Accounts Receivables
Free Assets:
P 36,000.00 Cash
270,000.00 Inventory
Total Free Assets:
Net Free Assets
P 936,000.00 Total
Book Value Liabilities and Equity

P 396,000.00 Mortgage Payable

P 180,000.00 Notes Payable
Accounts Receivable

P 144,000.00 Liabilities for Priority Claims

P 270,000.00 Accounts Payable
P (54,000.00) Stockholder's Equity

P 936,000.00 Total
CATRIONA GREY CO.

Estimated Amounts to be Recovered by Creditors
March 31, 2016

Claims
TOTAL 990,000.00
To compute for Partially Secured Creditors
Partially Secured Claim 180,000.00

Less: Asset Pledged 135,000.00
Unsecured Portion 45,000.00
Estimated Recovery Percentage of Unsecured Creditor
Without Priority 40.00%
18,000.00
To Compute for Unsecured Without Priority Creditors

Unsecured without priority Claims 270,000.00
Estimated Recovery Percentage of Unsecured Creditor
Without Priority 40.00%
Est. Payment to Unsecured Claims 108,000.00
QUESTIONS:
1. The amount expected to be available for unsecured claims without priority (net free assets)
126,000.00
2. The expected recovery per peso of unsecured creditors 40.00%
3. The estimated payment to creditors 801,000.00
See above table of estimated amounts to be recovered by creditors for the breakdown
0. On March 31, 2016, the trustee provided the following information:
Estimated Realizable Value
36,000.00
135,000.00
126,000.00
504,000.00
CATRIONA GREY CO.

March 31, 2016
P 504,000.00
396,000.00 P 108,000.00
P 135,000.00
P 36,000.00
126,000.00 P 162,000.00
P 270,000.00
P 144,000.00
P 126,000.00
P (189,000.00)
P 315,000.00
P 396,000.00
P 180,000.00
135,000.00 P 45,000.00
P 144,000.00
P 270,000.00 P 270,000.00
P 315,000.00
CATRIONA GREY CO.

Amounts to be Recovered by Creditors
March 31, 2016
Estimated Payment Percentage of

Recovery Recovery
396,000.00 100%
153,000.00 85.00%
144,000.00 100% Dyan Nicole M Francisco:
108,000.00 40.00% Note that this amount should be e
the total Estimated Realizeable Va
801,000.00 Assets
Total Amount Paid
135,000.00
18,000.00
153,000.00
ut priority (net free assets)

y creditors for the breakdown
Estimated
=
Total Unsecured Creditors Without Priority Percentage
126,000.00
= 40.00%
315,000.00

Note that this amount should be equal to
the total Estimated Realizeable Value of
Assets
3
Problem (corrections are highlighted in RED)
Cash 8,000.00 Accounts payable
Notes receivable 120,000.00 Accrued expenses
Inventories 80,000.00 Salaries payable
Prepaid Expenses 10,000.00 Mortgage payable
Equipment, net 150,000.00 Ordinary Shares
Deficit
Total 368,000.00 Total
Additional Information:
a. Estimated net realizable value of the notes receivables was P105,000 and was pledged to the mortga
b. 80% of the book value of the inventories have an estimated fair value of P45,000 and was pledged to
c. The remaining book value of the inventories have an estimated fair value of P20,000.
d. 80% of the remaining unpaid accounts payable were secured by the equipment having an estimated
e. Prepaid expense has no estimated fair value.
f. Liquidation and administration expenses were estimated in the amount of P8,000.
g. Income tax payable had been accrued in the amount of P2,000 (the accountant recorded it using the
h. Interest on the notes receivable and mortgage payable have not been accrued in the amount of P10,
ANSWERED USING STATEMENT OF AFFAIRS
WAPERA CORPORATION
(Date)
Book Value Assets Estimated Realizable Va
P 150,000.00 Assets Pledged to Fully Secured Creditors:
Equipment, Net P
Accounts Payable

P 64,000.00 Inventory P
120,000.00 Notes Receivables (plus interest)
Free Assets:
P 8,000.00 Cash P
10,000.00 Prepaid Expense
16,000.00 Inventory
Total Free Assets:
Net Free Assets
P 368,000.00 Total
Book Value Liabilities and Equity Creditor's Claim
P 25,600.00 Accounts Payable P

155,000.00 Mortgage Payable
Interest on Mortgage Payable
Inventory
Notes Receivables (plus Interest)

P Liquidation Expense P
2,000.00 Income Tax
15,000.00 Salaries Payable

28,000.00 Accrued Expenses
Stockholder's Equity
P 100,000.00 Ordinary Shares
(12,000.00) Deficit
P 368,000.00 Total
WAPERA CORPORATION
(Date)

Claims
TOTAL 288,000.00
To compute for Partially Secured

Accounts Payable P 48,
Mortgage Payable 155,
Interest on Mortgage Payable
Inventory 45,
Notes Receivables 115,
Portion Unsecured 58,
Recovery for unsecured portion
To compute for Unsecured without priority

Accounts Payable P 6,
Accrued Expenses 28,
34,
unsecured claims Paid
WAPERA CORPORATION
Deficiency Statement
(Date)
Estimated Losses on Realization of Assets:
Notes receivable (without Interest) P 15,000.00
Prepaid Expenses 10,000.00
Equipment, net 90,000.00
Additional Liabilities:
Interest Expense on Mortgage Payable 15,000.00
Estimated Liquidation Expense 8,000.00
Estimated Gross Loss P 153,000.00
Less:
Estimated Gains on Realization of Assets:
P -
Additional Assets:
Interest Receivable from Note Receivable 10,000.00
Estimated Net Loss P 143,000.00
Less:
Loss to be absorbed by Stockholders:
Ordinary Shares P 100,000.00
Deficit P (12,000.00) 88,000.00
Estimated Deficiency to unsecured creditors P 55,000.00
ANSWERED USING STATEMENT OF REALIZATION AND LIQUIDATION

WAPERA CORPORATION
Assets Realized:
Realization Proceeds Current Fair Values
Cash P 8,000.00 8,000.00
Notes receivable 115,000.00 120,000.00
Inventories 65,000.00 80,000.00
Prepaid Expenses - 10,000.00
Equipment, net P 60,000.00 150,000.00
Total P 248,000.00 368,000.00
Liquidated:
Payment Book Value
Accounts payable P 74,404.76 80,000.00
Accrued expenses 11,333.33 28,000.00
Salaries payable 15,000.00 15,000.00
Mortgage payable 116,190.48 155,000.00
Interest on Mortgage Payable 15,000.00
Income Tax Payable 2,000.00 2,000.00
Anticipated Liquidation and Admin 8,000.00
Total P 241,928.57 280,000.00
Estate Deficit, End
WAPERA CORPORATION
Assets To Be Realized: Assets Realized:
Notes receivable P 120,000.00 Notes receivable (with Interest)
Inventories 80,000.00 Inventories
Prepaid Expenses 10,000.00 Prepaid Expenses
Equipment, net 150,000.00 Equipment, net
Assets Acquired: Assets Not Realized:

Interest Receivable - NR P 10,000.00
Liabilities Liquidated: Liabilities to be Liquidated:

Accounts payable P 74,404.76 Accounts payable
Accrued expenses 13,333.33 Accrued expenses
Salaries payable 15,000.00 Salaries payable
Mortgage payable 116,190.48 Mortgage payable
Liabilities Not Liquidated: Liabilities Assumed:
Accounts Payable P 5,595.24
Accrued Expenses 16,666.67
Mortgage Payable 38,809.52
Supplementary Debits/Charges: Supplementary Credits:
Liquidation Expense P 8,000.00 Interest from Notes Receivables
Interest Expense on MP 15,000.00
Net Gain (to balance) P Net Loss (to balance)
TOTAL P 673,000.00 TOTAL
ANSWERS TO QUESTIONS:
1. How much is the estimated deficiency? (55,000.00)
2. How much are the net free assets? 37,400.00
3. How much is the estimated payment to the mortgage payable?
Partially Secured Mortgage Payable (with interest) 170,000.00

Less: Asset Pledged: 115,000.00
Unsecured Portion 55,000.00
Estimated Recovery Percentage 40.48%
Unsecured Portion Paid 22,261.90
4. How much is the estimated recovery percentage to the partially secured accounts?
Partially Secured Accounts Payable 48,000.00

Less: Assets Pledged 45,000.00
Unsecured portion 3,000.00
Estimated Recovery Percentage 40.48%
Unsecured Portion Paid 1,214.29
80,000.00
30,000.00
15,000.00
155,000.00
100,000.00
(12,000.00)
368,000.00
d was pledged to the mortgage payable

f P45,000 and was pledged to 60% of the accounts payable
e of P20,000.
uipment having an estimated fair value of P60,000.
of P8,000.
ountant recorded it using the accrued expense account)
ccrued in the amount of P10,000 and P15,000 respectively.
ORPORATION
t of Affairs
ate)
60,000.00
25,600.00 P 34,400.00
Pledged to Inventories
60%
45,000.00 48,000.00
115,000.00
8,000.00
-
20,000.00 P 28,000.00
P 62,400.00 Inventories
P 25,000.00 80%
P 37,400.00 20%
P (55,000.00) 100%
P 92,400.00
25,600.00
Estimated Recovery Percentage of Unsecured
48,000.00 Net Free Assets

155,000.00 Total Unsecured Creditors Without Prior
15,000.00
45,000.00
115,000.00 P 58,000.00
8,000.00
2,000.00
15,000.00
6,400.00
28,000.00 P 34,400.00
P 92,400.00
ORPORATION
e Recovered by Creditors
ate)
Estimated Payment
Recovery Percentage of Recovery
25,600.00 100%
183,476.19 90.38% Dyan Nicole M Francisco:
25,000.00 100% Note that this amount should be equal to
13,923.81 40.48% the total Estimated Realizeable Value of
Assets
248,000.00
Total Amount Paid

48,000.00
155,000.00
15,000.00
45,000.00 45,000.00
115,000.00 115,000.00
58,000.00
40.48%
23,476.19 23,476.19
183,476.19
6,400.00
28,000.00
34,400.00
40.48%
13,923.81
RATION
and Liquidation
ed, (date)
P (88,000.00)
Loss or (Gain)
-
5,000.00
15,000.00
10,000.00
90,000.00
120,000.00 P 120,000.00 Dyan Nicole M Francisco:
Assumed that the difference between the payment
and book value are the amounts that are not yet
liquidated, so no gain/loss should be recognized
Loss or (Gain)
- the only gains or losses to be recognized are those
from supplemental credit/charges and additional
-
liabilities
-
- Dyan Nicole M Francisco:
Part of Accured Expenses
15,000.00 The 2,000 was only reclassed to Income Tax
- Payable, No effect to Gain/loss
8,000.00
23,000.00 P 23,000.00
P 55,000.00
RATION
and Liquidation
ed, (date)
P 115,000.00
65,000.00
-
60,000.00
P -
P 80,000.00
30,000.00
15,000.00
155,000.00
P

Note that this amount should be
P 10,000.00 equivalent to the estimated net loss
on the statement of deficiency above
P 143,000.00
P 673,000.00
Total Amount Paid
115,000.00
22,261.90
137,261.90 Total Paid Amount
170,000.00 Divided by Partially Secured MP
80.74% Estimated Recovery Percentage
Total Amount Paid
45,000.00
1,214.29
46,214.29 Total Paid Amount
48,000.00 Divided by Partially Secured AP
96.28% Estimated Recovery Percentage
Accounts Payable
80,000
Remaining
40%
32,000.00
Pledged to Equipment Unsecured AP

80% 20%
25,600.00 6,400.00
Book Value Fair Value Gain or (Loss)

64,000.00 45,000.00 (19,000.00)
16,000.00 20,000.00 4,000.00
80,000.00 65,000.00 (15,000.00)
overy Percentage of Unsecured Creditor Without Priority
Estimated
=
ecured Creditors Without Priority Percentage
37,400.00
= 40.48%
92,400.00
ncisco:
t should be equal to
ealizeable Value of
ween the payment
that are not yet
d be recognized
ognized are those

s and additional
Income Tax
4 Problem (corrections are highlighted in RED)
Bancarote Inc. is under court-supervised liquidation due to its insolvency. The court appointed liquidator has pr
· The total assets which are not used as security for any liability amounted to P5 Million while the total unse
· The total assets which are used as collateral or security for corporate obligations amounted to P10M. three
with book value of P3.5M including interest.
· Salaries payable amounted to 2M while taxes due government amounted to P1M.
BANCAROTE INC.
(Date)
Book Value Assets Estimated Realiza
P 7,500,000.00 Assets Pledged to Fully Secured Creditors: P
P 2,500,000.00 Assets Pledged to Partially Secured Creditors: P
P 5,000,000.00 Free Assets P

Total Free Assets:
Net Free Assets
P 15,000,000.00 Total
Book Value Liabilities and Equity Creditor's C
P 2,000,000.00 Fully Secured Creditors: P
P 3,500,000.00 Partially Secured Creditors: P


P 2,000,000.00 Salaries Payable P
1,000,000.00 Taxes Due to Government
P 17,000,000.00 Unsecured Creditors without Priority: P
P (10,500,000.00) Stockholder's Equity

P 15,000,000.00 Total
BANCAROTE INC.
(Date)
Class of Creditors:
Amount of Claims
Fully Secured 2,000,000.00
Partially Secured 3,500,000.00
Unsecured with Priority 3,000,000.00
Unsecured without Priority 17,000,000.00
TOTAL 25,500,000.00
To Compute Est. Payment Recovery for Partially Secured Creditors
Partially Secured Creditor

Less: Assets Pledged
Unsecured Portion
Amount Paid for Unsec. Portion
To Compute Est. Payment Recovery for Unsecured Without Priority
Unsecured Without Priority

Est. Payment Recovery
ANSWERS TO QUESTIONS:
1. What is the estimated recovery percentage of unsecured creditors without priority?
2. What is the amount received by partially secured creditors?

ourt appointed liquidator has provided the following data after an inventory of Bancarote’s assets and liabilities:
o P5 Million while the total unsecured liabilities amounted to P20 Million.
ations amounted to P10M. three-fourth of these assets secure a mortgage payable with book value of P2M including interest while the rem
CAROTE INC.
ment of Affairs
(Date)
7,500,000.00
2,000,000.00 P 5,500,000.00
2,500,000.00
5,000,000.00 P 5,000,000.00
P 10,500,000.00 Estimated Recovery Percentage of Unsec
P 3,000,000.00
P 7,500,000.00 Net Free Assets
P (10,500,000.00) Total Unsecured Creditors Without Prior
P 18,000,000.00
2,000,000.00
3,500,000.00
2,500,000.00 P 1,000,000.00
2,000,000.00
1,000,000.00
17,000,000.00 P 17,000,000.00
P 18,000,000.00
CAROTE INC.
to be Recovered by Creditors
(Date)
Estimated Payment Percentage of
Recovery Recovery
2,000,000.00 100%
2,916,666.67 83.33%
3,000,000.00 100%
7,083,333.33 41.67% Dyan Nicole M Francisco:
15,000,000.00 Note that this amount should be equal to
the total Estimated Realizeable Value of
Assets
Total Amount Paid

3,500,000.00
2,500,000.00 2,500,000.00
1,000,000.00
41.67%
416,666.67 416,666.67
2,916,666.67
3,500,000.00 Divided by Amount of Claim
83.33% Est. Recovery Percentage
17,000,000.00
41.67%
7,083,333.33
ors without priority? 41.67%
2,916,666.67
M including interest while the remainder secure a note payable
ated Recovery Percentage of Unsecured Creditor Without Priority
Estimated
=
l Unsecured Creditors Without Priority Percentage
7,500,000.00
= 41.67%
18,000,000.00
d be equal to
le Value of
5 PROBLEM
The Sabaw Company had a very unstable financial condition caused by a deficiency of liquid assets.
On February 4, 2016, the following information was available.
CASH
Assets not Realized:
Accounts Receivables
Mechandise Inventory
Investment in Common Stock
Land
Building
Machinery and Equipment
Liabilities not Liquidated:

Notes Payable
Accounts Payable
Salaries and Wages
Taxes Payable
Bank Loan
Estate Deficit
During the 6 months period ending July 31, 2016, the trustee sold the Investment in Common Stock for P26,000,
realized P84,000 for the accounts receivables, sold the merchandise for P152,000, and paid-off P26,000 of the bank loan
and all liabilities with priorities (Salaries and wages payable, taxes payable) as well as P7,440 for estate administration expenses.
Determine:
1. The estate deficit, ending (July 31, 2016), should be:
2. The net (gain)/loss or realization and liquidation should be:
3. The cash balance, ending (July 31, 2016) should be:
SABAW CORPORATION
For the month ended, July 31, 2016
Assets Realized:
Sales Price
Investments P 26,000.00
Accounts Receivables 84,000.00
Inventory 152,000.00
Total P 262,000.00
Liquidated:
Payment
Bank Loan P 26,000.00
Salaries payable 40,000.00
Tax Payable 8,000.00
Anticipated Liquidation and Admin Exp 7,440.00
Total P 81,440.00
Estate Deficit, End
WAPERA CORPORATION
Assets To Be Realized:
Accounts Receivables P 80,000.00
Mechandise Inventory 160,000.00
Investment in Common Stock 26,400.00
Land 100,000.00
Building 60,000.00
Machinery and Equipment 48,000.00
Assets Acquired:
P
Liabilities Liquidated:
Bank Loan P 26,000.00
Salaries payable 40,000.00
Tax Payable 8,000.00
Liabilities Not Liquidated:

Notes Payable P 244,000.00
Accounts Payable 288,000.00
Bank Loan 154,000.00
Supplementary Debits/Charges:
Liquidation Expense P 7,440.00
Net Gain (to balance) P

TOTAL P 1,241,840.00
SABAW CORPORATION
BALANCE SHEET Dyan Nicole M Francisco:
As of July 31, 2016 This is a balancing figure account
Assets you must get the total liabilities a
Current Assets which is equivalent to the total as
Cash 292,560.00 the balance of cash.
Non- Current Assets
Land 100,000.00
These are the Assets not Realized
Buildings 60,000.00 presented in the Statement of
Machinery & Equipment 48,000.00 Realization and Liquidation above
Total Assets 500,560.00
Liabilites and Shareholder's Equity

Current Liabilities
these are the liabilities not liquida
in the Statement of Realization an
Liquidation above
these are the liabilities not liquida
Non-Current Liabilities in the Statement of Realization an
Notes Payable 244,000.00 Liquidation above
Total Liabilities 686,000.00
Estate Deficit (185,440.00) This is the ending balance of esta
Total Liabilities and Deficiency 500,560.00 is negative because the nature of
really a negative account balance
112,000.00
80,000.00
160,000.00
26,400.00
100,000.00
60,000.00
48,000.00
244,000.00
288,000.00
40,000.00
8,000.00
180,000.00
(173,600.00)
n Stock for P26,000,

off P26,000 of the bank loan
for estate administration expenses.
185,440.00
11,840.00
292,560.00
SABAW CORPORATION
nt of Realization and Liquidation
he month ended, July 31, 2016
P 173,600.00
Current Fair Values Loss or (Gain)

26,400.00 400.00
80,000.00 (4,000.00)
160,000.00 8,000.00
266,400.00 4,400.00 P 4,400.00

Book Value Loss or (Gain) Assumed that the difference be
180,000.00 - and book value are the amount
40,000.00 - liquidated, so no gain/loss shou
8,000.00 - the only gains or losses to be re

0 7,440.00 from supplemental credit/charg
228,000.00 7,440.00 P 7,440.00 liabilities
liquidated, so no gain/loss shou
the only gains or losses to be re

from supplemental credit/charg
liabilities
P 185,440.00
WAPERA CORPORATION
nt of Realization and Liquidation
or the month ended, (date)
Assets Realized:
Investments P 26,000.00
Accounts Receivables 84,000.00
Inventory 152,000.00
Assets Not Realized:

Land P 100,000.00
Buildings 60,000.00
Machinery & Equipment 48,000.00
Liabilities to be Liquidated:
Notes Payable P 244,000.00
Salaries and Wages 40,000.00
Taxes Payable 8,000.00
Liabilities Assumed:
Supplementary Credits:
Interest from Notes Receivables P -
Net Loss (to balance) P 11,840.00

TOTAL P 1,241,840.00

This is a balancing figure account,
you must get the total liabilities and deficiency
which is equivalent to the total assets, then squeeze
the balance of cash.

These are the Assets not Realized
presented in the Statement of
Realization and Liquidation above.

these are the liabilities not liquidated
in the Statement of Realization and
Liquidation above
these are the liabilities not liquidated
in the Statement of Realization and
Liquidation above

This is the ending balance of estate deficit, it
is negative because the nature of deficit is
really a negative account balance.
Assumed that the difference between the payment
and book value are the amounts that are not yet
the only gains or losses to be recognized are those

liabilities
the only gains or losses to be recognized are those

liabilities

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1 The unsecured creditors of Kaladkaren Corporation filed a petition on July 1, 2019 to force Kaladkaren Corporation into b

Assets Book Value

Liabilities and Equity

ANSWERED USING STATEMENT OF AFFAIRS

Assets Pledged to Partially Secured Creditors:

Book Value Liabilities and Equity

Partially Secured Creditors:

Unsecured Creditors with Priority:

Unsecured Creditors without Priority:

Class of Creditors: Amount of

To Compute Est. Payment Recovery for Partially Secured Creditors

Partially Secured Creditor

To compute for Unsecured without priority

ANSWERED USING STATEMENT OF REALIZATION AND LIQUIDATION

Estate Deficit, End

Liabilities Not Liquidated:

Estimated Realizable Values

Creditor's Claim Unsecured Liabilities

tially Secured Creditors Dyan Nicole M Francisco:

Current Fair Values Loss or (Gain)

Net Loss (to balance) P 670,000.00 Dyan Nicole M Franci

Goodwill is automatically zero, It is only possible to realize goodwill under

Goodwill is automatically zero, It is only possible to realize goodwill under

Dyan Nicole M Francisco:

Estimated Recovery Percentage of Unsecured Creditor Without Priority

Estimated Liquidation Expense

Assumed that the difference between the payment and

the only gains or losses to be recognized are those from

Dyan Nicole M Francisco:

Liabilities Book Value

*Estimated Deficiency (Balancing Figure) (54,000.00)

CATRIONA GREY CO.

Assets Pledged to Partially Secured Creditors:

Book Value Liabilities and Equity

Partially Secured Creditors:

Unsecured Creditors with Priority:

Unsecured Creditors without Priority:

P (54,000.00) Stockholder's Equity

CATRIONA GREY CO.

Class of Creditors: Amount of

To compute for Partially Secured Creditors

Partially Secured Claim 180,000.00

To Compute for Unsecured Without Priority Creditors

CATRIONA GREY CO.

Creditor's Claim Unsecured Liabilities

CATRIONA GREY CO.

Estimated Payment Percentage of

Total Amount Paid

ut priority (net free assets)

Dyan Nicole M Francisco:

ANSWERED USING STATEMENT OF AFFAIRS

Assets Pledged to Partially Secured Creditors:

Partially Secured Creditors:

Unsecured Creditors with Priority:

Unsecured Creditors without Priority:

Class of Creditors: Amount of

To compute for Partially Secured

To compute for Unsecured without priority