Mount Inc. was a hardware store that operated in Boise, Idaho. Management made some poor inventory acquisitions that loaded the store with unsalable merchandise. Due to the decline in revenues, the company became insolvent. Following is a trial balance as of March 15, 2018, the day the company filed for Chapter 7 liquidation. DebitCreditAccounts payable $42,900 Accounts receivable$32,500 Accumulated depreciation-Building 65,000 Accumulated depreciation-Equipment 20,800 Additional paid-in capital 10,400 Advertising payable 5,200 Building 104,000 Cash 1,300 Common stock 65,000 Equipment 39,000 Inventory 130,000 Investments 19,500 Land 13,000 Note payable-Idaho Savings and Loan (secured by a

Question

lien on land and building)    91,000 Note Payable-Second National Bank (secured by equipment)    195,000 Payroll taxes Payable    1,300 Retained earnings (deficit) 163,800    Salaries payable (split equally between two employees)    6,500 Totals$503,100 $503,100 ??Company officials believed that sixty percent of the accounts receivable could be collected if the company was liquidated. The building and land had a fair value of $97,500, while the equipment was worth $24,700. The investments represented shares of a publicly traded company that could be sold at the time for $27,300. The entire inventory could be sold for only $42,900. Administrative expenses necessary to carry out a liquidation were estimated to be $20,800.?How much cash would have been paid to an unsecured non-priority creditor who was owed a total of $1,300 by Mount Inc.?  (Round the payout percentage to a whole number.)

What will be an ideal response?

Answer 1

The statement of realization and liquidation prepared in Item 13-07 indicated that $105,300 in cash remained. However, $33,800 of this amount had to be distributed to the liabilities with priority, leaving only $71,500 for the unsecured non-priority creditors. Since these unsecured liabilities amounted to $241,800, about 30% ($71,500 ÷ $241,800) of each debt would have been paid. Thus a creditor holding a $1,300 claim would have received approximately $390.