Equipment with a Book Values of $120,000 Is Sold in a Liquidation

question 13

Multiple Choice

Equipment with a book values of $120,000 is sold in a liquidation process for cash of $110,000. This equipment was security for a $150,000 bank loan. Any remainder is consider unsecured, class 7. How would this transaction be reported on the Statement of Realization and Liquidation?

• A) A reduction in non-cash assets of $120,000
• B) A loss reported to owner's equity of $10,000
• C) A disbursement of cash to the bank of $110,000, a reduction in partially secured liability of $150,000, and an increase in unsecured without priority liability of $40,000
• D) all of the above would occur

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Definitions:

Proximate Cause

The extent to which, as a matter of policy, a defendant may be held liable for the consequences of his or her actions. In the majority of states, proximate cause requires that the plaintiff and the type of injury suffered by the plaintiff were foreseeable at the time of the accident. In the minority of states, proximate cause exists if the defendant’s actions led to the plaintiff’s harm.

Legal Cause

A legally sufficient reason to file a lawsuit, based on recognized legal principles.

Duty To Render

The legal or ethical obligation to provide a certain level of care or service, especially in professional or emergency situations.

Peril To Herself

Refers to someone being in a situation or engaging in behavior that poses a significant risk of harm to their own well-being.