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:

Partnership Capital

The total amount of assets or equity contributed by all partners in a partnership.

Capital Balances

Capital balances reflect the amount of capital that owners or shareholders have invested in a company, encompassing both contributed capital and retained earnings.

Admission

The process or fee associated with entering or becoming a member of a particular organization, event, or institution.

Journal Entry

A record in accounting that represents a transaction where debits and credits are equal, crucial for maintaining the accuracy of financial statements.