CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX
CORPORATE LIQUIDATION
Part I: Theory of Accounts
1. Which of the following statements is true regarding the Statement of Affairs
A. The Statement of Affairs is normally prepared at the end of liquidation. start
B. The historical cost amounts are relevant in this statement realizable
C. This statement is not a going-concern report. liquidating concern
D. This statement reflects the book value of the debtor's assets and its application of the proceeds
to specific liabilities realizable
2. These are the assets pledged to a specific liability which the estimated realizable value of the assets
exceeds the amount of liability.
A. Assets pledged to partial secured creditors
B. Assets pledged to fully secured creditors
C. Assets pledged to unsecured creditors
D. Free assets
3. The following are considered unsecured creditors with priority except
A. Taxes
B. Wages
C. Administrative / Liquidation expenses
D. Loans
4. Which of the following statements regarding the Statement of Realization and Liquidation is false?
A. This statement shows a complete record of the transactions of the receiver for a period of time.
B. Realization of assets only means collection of receivables from customers. can also be sale
C. The duty of the receiver is to realize the assets, to convert the non-cash assets into cash.
D. When done, this statement will generate a gain or loss.
9705
Page 2
Part II: Problem Solving
Problem 1
AAA Corp. has the following statement of financial position:
LIABILITIES and SHAREHOLDERS’
ASSETS
EQUITY
Cash 5,000 Note payable (short-term) 128,000 x 1.08 = 138,240 PSC
Marketable securities 40K 38,000 Accounts payable 105,000
579K
Accounts receivable 25K 55,000 Accrued expenses 58,000 - 22K - 13K = 23K
Inventory APWPSC 58.8K 65,000 Note payable (long term) 288,000 x 1.08 = 311,040 FSC
562,300 Prepaid expenses 3,500 Share capital (31,500)
55,000
Land APWFSC 365K
255K150,000 Retained earnings (deficit) (86,500)
Building 110K125,000 255 - 150 = 105
Equipment 68.5K 98,000 110 - 125 = (15)
Intangible assets 8,000
Total Assets P547,500 Total Liabilities and P547,500
Shareholders’ Equity
128K x 8% = 10,240
288K x 8% = 23,040
33,280
Additional information: GW cannot be realized
The note payable (short-term) was secured by the inventory and the note payable (long term) was
secured by the land and building
Marketable securities have an estimated appraised value of P40,000
Only P25,000 can be collected from the accounts receivable
Inventory can only be sold at P58,800
Estimated fair value of the land was P255,000 and building was P110,000 and the estimated fair
value of the equipment was P68,500
Aldrin/German: A-S-T
Administrative expenses of P51,500 were estimated as liquidation expenses
R. Valix: SAT
Salaries of P22,000 and payroll taxes of P13,000 were accrued
Interest on the note payable (both short-term and long-term) is 8% had not been accrued
Other non-cash assets not mentioned above are considered worthless
1. What is the amount of estimated deficiency? L&B 365,000 PSC 138,240
FSC (311,040) APPSC (58,800)
A. 68,200 ERA of Assets 562,300 Free 53,960 US 79,440
ULWOP 207,440
B. 49,980 NFA (105,960)
Recorded Liab (579K) Other 138,500 ULWOP 128,000
Unrec Liab/Exp (84,780) Total 192,460 Total 207,440
C. 101,480 Def 101,480 ULWP (86,500)
Est Deficiency (101,480)
D. 100,680 NFA 105,960
Free Unsecured
Cash 5K NP 79,440
2. What is the amount of estimated recovery percentage? L&B 53,960 AP 105K
MS 40K Acc Exp 23K
A. 51.08% NFA 105,960 ÷ AR 25K
B. 65.42% ULWOP 207,440 Eqmt 68.5K
Recov 51.08%
C. 75.91% TFA 192,460
ULWP (86.5K) 207,440
D. 51.28% NFA 105,960 101,480
3. What are the amount of estimated recovery and the estimated recovery percentage for
partially secured creditors?
Secured 58,800
A. 113,330 and 80.53% US 79,440 x 51.08%: 40,578
B. 99,378 and 71.89% Total 99,378
C. 110,770 and 80.13% PSC ÷ 138,240
Recovery 71.89%
D. 99,537 and 72.00%
4. What is the amount estimated recovery for unsecured creditors without priority?
A. 83,738 ULWOP 128,000
Est. G/(L) on Asset Realization Step1: Est Net Gain 14,800
Recorded ERA Est G/(L) Step2: Unrec (Liab)/Asset (84,780) 51,500 + 33,280
B. 97,165 Recov 51.08% MS 38K 40K 2K Step3: Estate Deficit (31,500)
C. 65,638 Est 65,382 AR 55K 25K (30K) Est Deficiency 101,480
D. 65,382 Inv 65K 58.8K (6.2K)
PE 3.5K 0 (3.5K)
L&B 275K 365K 90K
Eqt 98K
IA 8K
68.5K (29.5K)
0 (8K)
9705
Est Gain on Asset Real 14,800
GAIN ON ASSET REAL - INDIV
LOSS ON ASSET REAL - INDIV
NET G/L - SUM OF ALL
Page 3
Problem 2
Book value Estimated realizable value
Cash 100,000 100,000
Inventory 80,000 70,000
Building 500,000 750,000
The inventory was pledge to an accounts payable in the amount of P50,000. The building was pledged
to a mortgage payable including its interest in the amount of P800,000. Salaries was P100,000 and
taxes was P50,000. Other liabilities not mentioned was P150,000.
1. What is the amount paid to the holder of the mortgage payable?
A. 800,000 APWFSC 70,000 PSC 800,000
B. 500,000 FSC (50,000) APPSC (750,000)
Free 20,000 US 50,000
C. 750,000 Other 100,000 ULWOP 150,000
D. 0 Total 120,000 Total 200,000
ULWP (100,000) Exc WP 30,000 (50K - 20K)
Taxes 20,000 Est Def 230,000
2. What is the amount paid for the taxes?
if FA < ULWP
A. 50,000 1. NFA - 0
B. 20,000 2. Est RP - 0%
3. Est Def - Excess WP will be included
C. 30,000
D. 0
Problem 3
CCC Corp. has the following balances in July 1, 2025:
Cash 5,500 Accounts payable 59,500
119,500
30,625 Accounts receivable 35,000 Wages payable 25,000
60,000 Inventories 60,000 Tax payable 359,500 35,000
429K
68,500 Notes receivable 78,000 Note payable 65,000
256,000 Equipment 256,000 Mortgage payable 175,000
415,215 Share capital 120,000 75K estate equity
Deficit RE (45,000)
Total 434,500 Total 434,500 estate deficit - whole SHE
In the statement of realization and liquidation the following data are ascertained for the month of July:
The note payable and mortgage payable together with their respective interests are paid. Only 7/8 is
collected from the existing accounts receivable at the beginning of the month. Half of the Inventories
were sold for P45,000. Only P68,500 of the notes receivable is collected. Equipment is sold for
P225,000. Administrative expenses of P13,800 are paid. Additional credit sales amounting to P10,500
are made for the remaining inventories. Interests accrued for the month are note receivable P1,500, note
payable P5,500 and mortgage payable P10,500. All existing noncash assets at the beginning of the
month are sold or collected during the month. 1.5K + 10.5K = 12K
1. What is the profit or loss in the statement of realization and liquidation?
Debits Credits AR: 35K x 1/8 = 4,375 Cash, end 104,825 AP 59,500
I
ATBR AR
A. (42,475) (Exp & Loss) (Inc, Profit, Gain) Inv: 45K - (60K x 50%) = 15K
429,000 415,125
AR 10,500 WP 25K
AR 4,375 Inv 15,000 NR: 68,500 - 78,000 = 9.5K Int Rec 1,500 TP 35K
B. 27,975 NR 9,500 Int 1,500 Eqpt: 225K - 256K = 31K
Deficit, end (2,675)
C. (77,675) Eqp 31,000 Inv: 10,500 - (60K x 50%) = 19.5K AA ANR
Exp 13,800 Int Exp: 5,500 + 10,500 = 16K Assets, end 116,825 116,825
12,000 12,000
D. 75,175 Inv 19,500
Int 16,000 16,500
94,175 77,675 LL LTBL
256,000 359,500
2. What is the estate equity at July 31, 2025?
37
·
5
LNL LA
375
A. (102,975)
119,500 16,000
B. 32,525 Equity, beg 75,000 (120K - 45K) C/S 120K
LOR (77,675) Deficit, end (122,675)
C. 150,175 Equity, end (2,675) Deficiency Estate Deficit(2,675)
SD SC
120,800 57,000
D. (2,675) 45K + 77,675 = 122,675
937,300 > 859,625
① Cash 30,625 ③ Cash 68,500 ⑤ Admin Exp 13,800 9705
AR 30,625 NR 68,500 Cash 13,800 77,675 LOSS
⑦ Int Rec 1,500
⑥ 8 Int Exp (5,500 + 10,500) 16,000
② Cash 45,000 Int Inc 1,500 AR 10,500
Int Payable 16,000
Sales 45,000 Sales 10,500
⑪ Cash
⑨ Mortgage Payale 175,000
COS (60K x 50%) 30,000 225,000 COS (60K x 50%) 30,000
Note Payable 65,000
Inventory 30,000 Loss 31,000 Inventory 30,000
Int Payable 16,000
Equipt 256,000
Cash 256,000
Page 4
Problem 4
A Statement of Realization and Liquidation has been prepared for TUV Co. The details are given
below:
Assets to be Realized Beg NCA 60,000 Liabilities assumed Increase in Liab 50,000
Assets Acquired Increase in Assets 40,000 Liabilities not liquidated Liab, end 65,000
Assets Realized Proceeds 55,000 Supplementary credits rev earned 110,000
Liabilities to be Liquidated Beg Liab 80,000 Supplementary debits /charges 100,000
Liabilities paid /liquidated 65,000
LOSS
In the SORAL, the total of the debit side is greater than the total of the credit side by P12,000. The
ending balance of Capital Stock and Retained Earnings are P100,000 and (P85,000), respectively.
15K
1. What is the amount of the beginning cash balance?
A. 47,000 ATBR: 60K AR: 55K
Equity, beg 27,000 AA: 40K ANR: 23K
B. 35,000 LTBL 80,000 (Liab, beg)
C. 20,000 Assets 107,000
Bok
LP: 65K LTBL: 80K 130K
ATBR (60,000) (NCA, beg) LNL: 65K LA: 50K
D. 0 Cash, beg 47,000
SD: 100K SC: 110K
2. What is the amount of beginning estate equity? DR 330,000 318,000 CR
12,000 LOSS
A. 5,000 Equity, beg 27,000 85 - 12 (73K) 60 + 40 - 23 = 77 BV of Assets - 55 = (22)
B. 9,000 G/L (12,000) + C/S 100K Loss + Exp (100) = (122) + 110 = (12K) NL
Equity, end 15,000 (100K - 85K) Equity, beg 27K
C. 3,000 55 + 110 - 40 = 125 - 65 LP = 60 -
D. 27,000 100 = (40) + 50 = 10 Inc in Cash
Equity, end 15,000
Liab, end 65,000 (LNL)
Assets, end 80,000
NCA, end (23,000) (ANR)
Cash, end 57,000
END
9705
