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Exhibit 13.3 has been constructed in this style to display the liquidation of Chaplin Company.
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In this manner, accountants can record the events as they occur to show and their effects on each account classification. One popular form presents the various account groups on a horizontal plane with the liquidating transactions shown vertically. The physical structure used to prepare a statement of realization and liquidation can vary significantly. The excess is then applied to the claims of unsecured non-priority creditors. The liabilities with priority are paid first. 9 – Noncash assets have now been converted into cash and all secured claims settled, so the trustee begins to distribute any remaining funds. The trustee also reclassifies the remaining portion of the partially secured liabilities as unsecured. 1 – A $24,900 invoice is received for various administrative expenses incurred in liquidating the company. 9 – After an extended search for a buyer, the equipment is sold for $42,000 in cash. The trustee immediately uses $205,000 of this money to pay off the secured creditors. The land and building are sold for $208,000. The intangible assets also are removed from the financial records because they have no cash value. 30 – The trustee determines that no refund is available from any of the company’s prepaid expenses. The remaining balances are all written off as bad debts.Īug. 17 – Accounts receivable of $16,000 are collected. The related investments (reported at $15,000) are then sold for $19,600.Īug. July 29 – Cash dividend of $500, accrued as of June 30, is collected. The net cash results are applied to the notes payable for which the inventory served as partial security. July 23 – The trustee expends $7,000 to dispose of the company’s inventory at a negotiated price of $51,000. Hence, the dividends receivable, interest payable, and additional payroll tax liability are recognized. July 1 – The accounting records in Exhibit 13.1 are adjusted to the correct balances as of June 30, 2009, the date on which the order for relief was entered. Liquidation Transactions of Chaplin Company-2009 : Consequently, discrepancies should be expected.Īssume the following transactions occur in liquidating this company:
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The previous statement was based on projected sales and other estimations, whereas a statement of realization and liquidation reports the actual transactions and other events as they occur. The dollar amounts resulting from this liquidation will not necessarily agree with the balances used in creating the statement of financial affairs in Exhibit 13.2. The court appointed an interim trustee whom the creditors then confirmed to oversee the liquidation of assets and distribution of cash. Assume that company officials have decided to liquidate the business, a procedure regulated by Chapter 7 of the Bankruptcy Reform Act. To demonstrate the production of a statement of realization and liquidation, the information previously presented for Chaplin Company will be used again. Return of the asset is not necessary, however, if the transfer was for no more than would have been paid to this party in a liquidation. This rule is intended to prevent one party from gaining advantage over another in the sometimes hectic period just before a bankruptcy petition is filed.
BUSN 30000 FINANCIAL ACCOUNTING NOTES FREE
The recipient must then return these payments so that they can be included in the debtor’s free assets. The trustee can also void any transfer of property (known as a preference) made by the debtor within 90 days prior to filing the bankruptcy petition if the company was already insolvent at the time.
BUSN 30000 FINANCIAL ACCOUNTING NOTES PROFESSIONAL
To accomplish such a multitude of objectives, this individual holds wide-ranging authority in bankruptcy matters, including the right to obtain professional assistance from attorneys and accountants. This individual must recover all property belonging to the insolvent company, preserve the estate from any further deterioration, liquidate noncash assets, and make distributions to the proper claimants.Īdditionally, the trustee may need to continue operating the company to complete business activities that were in progress when the order for relief was entered. In the liquidation of any company, the trustee is a central figure.