ASSIGNMENT

Nur Faizah Fauziah

A31115018

E 18-6 (Financial reporting during bankruptcy)

The balance sheet of Everlast Window Corporation at June 30, 2011, contains the following
items:

The company is in financial difficulty, and its stockholders and creditors have requested a
statement of affairs for planning purposes. The following information is available:
1. The company estimates that $63,000 is the maximum amount collectible for the accounts
receivable.
2. Except for 20% of the inventory items that are damaged and worth only $2,000, the cost of
the other items is expected to be recovered in full.
3. The land and building have a combined appraisal value of $170,000 and are subject to the
$150,000 mortgage and related accrued interest.
4. The appraised value of the machinery is $20,000.
5. Wages payable and property taxes payable are unsecured priority items that do not exceed
any limitations of the bankruptcy act.

REQUIRED
1. Prepare a statement of affairs for Everlast Window Corporation as of June 30, 2011.
2. Compute the estimated settlement per dollar of unsecured liabilities.
 1.
Everlast Window Corporation
Statement of Affairs on June 30, 2011
Asset:
RV Liability
RV Available for
Book Offsets for
unsecured
Value Secured
Creditors
Creditors
Pledged for fully secured creditors
$230,000 Land and building $170,000
Less: Mortgage payable and accrued interest (165,000) $ 5,000
Available for priority and unsecured creditors
40,000 Cash 40,000
70,000 Accounts receivable net 63,000
50,000 Inventories 42,000
60,000 Machinery net 20,000
50,000 Goodwill -
Total available for priority and unsecured Creditors 170,000
Less: Priority liabilities 70,000
Total available for unsecured creditors 100,000
Estimated deficiency 65,000
$500,000 $165,000
Liabilities and Stockholders Equity
Secured and Unsecured Non-
Book Value
Priority Claims priority Claims
Priority liabilities
$ 60,000 Wages payable $ 60,000
10,000 Property taxes payable 10,000
70,000
Fully secured creditors
150,000 Mortgage payable $150,000
15,000 Interest on mortgage payable 15,000
165,000
Unsecured creditors
110,000 Accounts payable $110,000
50,000 Note payable unsecured 50,000
Interest payable unsecured 5,000
5,000 5,000
Stockholders equity
200,000 Capital stock
(100,000) Retained earnings (deficit)
$500,000 $165,000

2. Settlement per dollar of rank 1 unsecured creditors is $.6250 ($100,000 available

for unsecured/$160,000 accounts and notes payable). No payment is made for the
$5,000 unsecured interest claim.