1 answer

= + + Assets $12,000 $16,000 = Allen White Liabilities $8,280 $3,840 + Common Stock $2,520...

Question:

= + + Assets $12,000 $16,000 = Allen White Liabilities $8,280 $3,840 + Common Stock $2,520 $8,800 + + Retained Earnings $ 1,2C. Assume Allen incurs a $5,100 operating loss. The remaining assets are sold for the value shown on the books, and the cash

= + + Assets $12,000 $16,000 = Allen White Liabilities $8,280 $3,840 + Common Stock $2,520 $8,800 + + Retained Earnings $ 1,200 $3,360 +
C. Assume Allen incurs a $5,100 operating loss. The remaining assets are sold for the value shown on the books, and the cash proceeds are distributed to the creditors and investors. How much money will be paid to creditors and how much will be paid to investors? Amount to paid creditors Amount to paid investors d. Assume White incurs a $5,100 operating loss. The remaining assets are sold for the value shown on the books, and the cash proceeds are distributed to the creditors and investors. How much money will be paid to creditors and how much will be paid to investors? Amount to paid creditors Amount to paid investors

Answers

Solution

C)

Loss incurred by Allen = $5,100

Remaining Assets = $12,000- $5,100 = $6,900

Since the amount is not able to cover the company’s total obligation to creditors of $8,280, Creditors will be paid the $6,900 realized from the sale, while investors will go home empty handed since Creditors are considered first in the event that a company liquidates or becomes bankrupt.

Amount Paid to creditors = $ 6,900

Amount Paid to investors = $ 0

D)

Loss incurred by White = $5,100

Remaining Assets = $16,000-$5,100

                             = $10,900

Creditors will be paid first an amount of $3,840 then investors will be paid the remaining $7,060.

Amount Paid to creditors = $ 6,900

Amount Paid to investors = $ 7,060

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