Advanced Accounting 12th Edition by Joe Ben Hoyle,Thomas Schaefer , Timothy Doupnik

Exercise 58

Oregon Corporation has filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Reform Act. Its creditors are considering an attempt to force liquidation. The company currently holds cash of $6,000 and accounts receivable of $25,000. In addition, the company owns four plots of land. The first two (labeled A and B) cost $8,000 each. Plots C and D cost the company $20,000 and $25,000, respectively. A mortgage lien is attached to each parcel of land as security for four different notes payable of $15,000 each. Presently, the land can be sold for the following:

Another $25,000 note payable is unsecured. Accounts payable at this time total $32,000. Of this amount, $12,000 is salary owed to the company's workers. No employee is due more than $3,400.
The company expects to collect $12,000 from the accounts receivable if liquidation becomes necessary. Administrative expenses required for liquidation are anticipated to be $16,000.
a. Prepare a statement of financial affairs for Oregon Corporation.
b. If the company is liquidated, how much cash would be paid on the note payable secured by plot B
c. If the company is liquidated, how much cash would be paid on the unsecured note payable
d. If the company is liquidated and plot D is sold for $30,000, how much cash would be paid on the note payable secured by plot B