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Unsecured Creditors Recovery Analysis

This document provides information and calculations for the liquidation of Down Dog Corporation. It includes: 1) A list of the company's assets and liabilities in order of priority for payment, including fully secured creditors, partially secured creditors, and unsecured creditors with and without priority. 2) Calculations of the estimated recovery for each class of creditors, including a 50% estimated recovery for unsecured creditors without priority. 3) Computations of the net loss on liquidation, which is estimated to be $90,000 based on differences between the assets' carrying values and estimated realizable values.

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Akira Marantal Valdez
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36 views6 pages

Unsecured Creditors Recovery Analysis

This document provides information and calculations for the liquidation of Down Dog Corporation. It includes: 1) A list of the company's assets and liabilities in order of priority for payment, including fully secured creditors, partially secured creditors, and unsecured creditors with and without priority. 2) Calculations of the estimated recovery for each class of creditors, including a 50% estimated recovery for unsecured creditors without priority. 3) Computations of the net loss on liquidation, which is estimated to be $90,000 based on differences between the assets' carrying values and estimated realizable values.

Uploaded by

Akira Marantal Valdez
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Advanced Accounting - PART 1

Chapter 6

Problem 6-2 Down Dog Corporation

Free assets
Cash
Accounts receivable
Inventory
Less: Liabilities with priority
Wages Payable
Liquidation Expenses
Net free assets

Partial secured creditors

Notes payable plus accrued interest


Less: Equipment

Unsecured liabilities without priority


Rent Payable
Accounts payable
Total Unsecured liabilities without priority
Defficiency

Expected recovery rate (Net free Assets / Total Unsecured liabilities without prioirty)

Deficiency rate (Defficiency / Total Unsecured liabilities without priority)

Fully secured creditors


Partially secured creditors
Unsecured liabilities with priority
Unsecured liabilities without priority

Cash
Accounts receivable
Inventory
Equipment
Total realizable value

1.) Compute the estimated amount available to unsecured creditors (with and without priority)/total

Cash received:
Unsecured creditors with priority
Unsecured creditors without priority (108000 * 50%)
Total cash received by unsecured claims ( Total free assets)

Alternative Solutions
Free Assets
Cash
Accounts receivable
Inventory
Total Free Assets

2.) Compute the estimated amount available to unsecured creditors without priority / net free assets

Unsecured creditors without priority (108,000 * 50%) / net free assets

Alternative Solutions
Total Free Assets
Less: Liabilities with Priorities
Net Free Assets

Computation of recovery for each class of creditors

Fully secured creditors


Partially secured creditors
Unsecured liabilities with priority
Unsecured liabilities without priority

Total assets measured at Net realizable value


Pledged assets
Free assets
Total

3.) Compute the amount of unsecured creditors without priority


4.) Compute the dividend to unsecured creditors without priority
5.) Compute the estimated payment to fully secured creditors
6.) Compute the estimated amount to partially secured creditors
7.) Compute the estimated amount to unsecured creditors with priority
8.) Compute the estimated amount to unsecured creditors without priority
9.) Compute the estimated payment to creditors
10.) Compute the estimated deficiency to unsecured creditors (100%-71.15%)
11.) Compute the estimated gain or loss on realization of assets

Gain on realization of assets


Loss on realization of assets

Carrying value
Cash 3,000
Accounts receivable 72,000
Inventory 60,000
Equipment 165,000
Balances

12.) Compute the estimated net loss


3,000
48,000
72,000 123,000

45,000
24,000 69,000
54,000

Liabilities without
Priority

96,000
87,000 9,000

27,000
72,000 99,000
108,000
(54,000)

d liabilities without prioirty) 50.00%

thout priority) 50.00%

Claims Recovery Recovery Rate


- - 0.00%
96,000.00 91,500.00 95.31%
69,000.00 69,000.00 100.00%
99,000.00 49,500.00 50.00%
264,000.00 210,000.00

3,000.00
48,000.00
72,000.00
87,000.00
210,000.00

creditors (with and without priority)/total free assets -

69,000
54,000
tal free assets) 123,000

3,000.00
48,000.00
72,000.00
123,000

creditors without priority / net free assets 54,000

%) / net free assets 54,000

123,000
69,000
54,000

Claims Recovery Recovery Rate


- ### 0.00%
96,000 91,500 95.31%
69,000 69,000 100.00%
99,000 49,500 50.00%
260,000 210,000

87,000
123,000
210,000

108,000
50.00%
-
91,500
with priority 69,000
without priority 49,500
210,000
rs (100%-71.15%) 50.00%

12,000
(102,000)

Realizable value Gain Loss Net gain


3,000 -
48,000 (24,000) (24,000)
72,000 12,000 12,000
87,000 (78,000) (78,000)
12,000 (102,000) (90,000)

(90,000)

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