Volunteer, Inc

question 35

Essay

Volunteer, Inc.is in the process of liquidating and going out of business.The firm has $69,820 in cash, inventory totaling $214,000, accounts receivable of $144,000, plant and equipment with a $384,000 book value, and total liabilities of $614,000.It is estimated that the inventory can be disposed of in a liquidation sale for 75% of its cost, all but 15% of the accounts receivable can be collected, and plant and equipment can be sold for $420,000.
(a.)Calculate the amount of cash that would be available to the stockholders if the accounts receivable are collected, the other assets are sold as described, and the liabilities are paid in full.
(b.)Describe how the difference between book value and liquidation value would be treated on the final income statement for Volunteer, Inc.with respect to the following assets: inventory, accounts receivable, and plant and equipment.What income statement accounts would be affected when these assets are sold or collected as described above?

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Definitions:

Economic Theory

A set of principles and frameworks used to understand, explain, and predict how economies operate and how economic agents interact.

Religious Values

Principles and moral standards shaped by religious beliefs that influence individuals' behavior and choices.

Corner Offices

Offices located at the corner of a building, often implying a prestigious or desirable location typically occupied by senior executives.

Economic Concept

A theoretical idea or principle that forms the basis of economic analysis and understanding, such as supply and demand.