ADVANCED ACCOUNTING PART II

CHAPTER 16- STATEMENT OF REALIZATION AND LIQUIDATION

EXERCISES
EXERCISE 16-1
The following balance sheet is prepared for the Watson Co. on December 1, when
C. Gonzales is appointed trustee to take over control:
Assets
Liabilities and Shareholders Equity
Cash
P 60,000
Accounts Payable
P 275,000
Receivables
180,000
Share, Capital
250,000
Merchandise
200,000
Retained Earnings
(10,000)
Furniture and Fixtures(net)
75,000
Total
P 515,000
Total
P 515,000
Transactions in December are summarized as follows:
Cash Receipts:
Sales of merchandise
Collection of receivables: P 92,500
Trusteeship
2,250
Cash disbursements:
Purchase of merchandise
Expenses

P 120,000
94,750
P214, 750
P 3,750
P 7,000
P10,750

Sales of merchandise on account in December totaled P 9,000. Company

receivables of P 3250 were written off as worthless. At the end of December the
merchandise on hand is valued at P112,500. Depreciation of furniture and fixtures is
P 1,250.
Instructions:
1. Prepare a statement of realization and liquidation in conventional form
together with supporting schedules.
2. Prepare a condensed balance sheet as of December 31 to prove the gain or
the loss for December.
Exercise 16-2
Below are transactions for the Aries Sales Co. in bankruptcy
(a) Sale of merchandise on account, P 125,000
(b) Collections of accounts receivable, P 67,500, uncollectible accounts of
P2,500 are written off.
(c) Sale of securities costing P85,000 for P 82,000
(d) Purchase of merchandise on account P 87,500

(e) Payment of selling expenses, P 23,750 of which P4,000 had accrued prior
to bankruptcy
(f) Depreciation of furniture and fixtures P 1,375.
(g) Trade of delivery truck with a book value of P6,000 for a new truck costing
P 11,000, P5,000 is allowed on the trade-in, and the balance is paid in
cash.
(h) Payments of accounts payable, P 49,000 after a P 1,000 discount
Instructions: Indicate how the preceding transactions will be reported on the
statement of realization and liquidation and the supplementary schedules prepared
in the conventional form
Exercise 16-3
A partially completed statement of realization and liquidation is as follows:
ABC Company
Statement of Realization and Liquidation
For the period July 1, 2010 to November 12, 2010
Assets
Cash Non-cash
Fully
Owners
secured
Priority
Equity
Beginning balances,
Assigned, July 1, 2010
P23,000
Cash receipts-Sale of
Inventory
5,000

P12,000
30,000

Partially
secured

P590,000

Liabilities
Unsecured
Without

With

Priority

P 200,000

P150,000

( 25,000)

The following additional transaction have occurred through November 12, 2010
a. Receivables collected amount ot P 39,000, receivables with a book value of
P15,000 that were not allowed for were written off
b. A P12,000 loan that was fully secured was paid off
c. A valid claim is received from a leasing company seeking payment of P15,000
for equipment metals
d. Securities costing P18,000 are sold for P23,000, minus brokerage fee of P500
e. Depreciation on machinery is P3,200
f. Payments on accounts payable total P25,000 of which the entire amount was
secured by the inventory sold.
g. Machinery that originally cost P85,000 and has book value of P45,000 sold for
P36,000
h. Proceeds from the sale of machineryin (g) are remitted to the bank, which
holds a P50,000 loan on machinery
Instructions:

1. Update the statement of realization and liquidation to properly reflect

transactions (a) through (b)
2. Assuming the remaining non-cash assets can be realized for P410,000,
determine the estimated dividends to be received by unsecured creditors
without priority.