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(Solved): The following balance sheet has been prepared by the accountant for Limestone Company as of June 3, ...

The following balance sheet has been prepared by the accountant for Limestone Company as of June 3, 2020, the date on which the company is to file a voluntary petition of bankruptcy:

Balance Sheet
June 3, 2020
Cash $ 8,000
Accounts receivable (net) 70,000
Inventory 98,000
Land 105,000
Buildings (net) 305,000
Equipment (net) 190,000
Total assets $ 776,000
Liabilities and Equities
Accounts payable $ 108,000
Notes payable—current (secured by equipment) 260,000
Notes payable—long-term (secured by land and buildings) 195,000
Common stock 125,000
Retained earnings 88,000
Total liabilities and equities $ 776,000

Additional Information

If the company is liquidated, administrative expenses are estimated at $23,000.

The accounts payable figure includes $15,000 in wages earned by the company's 12 employees during May. No one earned more than $2,700.

Liabilities do not include taxes of $19,000 owed to the U.S. government.

Company officials estimate that 45 percent of the accounts receivable will be collected in a liquidation and that the inventory disposal will bring $85,000. The land and buildings will be sold together for approximately $320,000; the equipment should bring $135,000 at auction.

Prepare a statement of financial affairs for Limestone Company as of June 3, 2020.

Statement of Financial Affairs
June 3, 2020
Book Values Assets Available for Unsecured Creditors
Pledged with Fully Secured Creditors:
Land and buildings $320,000
Less: Notes payable-long-term 195,000 $125,000
Pledged with Partially Secured Creditors:
Equipment 135,000
Less: Notes payable-current
Free Assets:
Accounts receivable
Total amount available to pay liabilities with priority and unsecured creditors $125,000
Less: Liabilities with priority
Available for unsecured creditors $125,000
Estimated deficiency
$0 $125,000
Book Values Liabilities and Stockholders' Equity Unsecured Nonpriority Liabilities
Liabilities with Priority:
Administrative expenses
Salaries payable
Taxes payable
Total $0
Fully Secured Creditors:
Notes payable-long term
Add: Land and buildings
Partially Secured Creditors:
Notes payable current
Less: Equipment $0
Unsecured Creditors:
Accounts payable
Stockholders' equity
$0 $0

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