Volunteer, Inc

question 14

Essay

Volunteer, Inc. is in the process of liquidating and going out of business. The firm has $34,910 in cash, inventory totaling $107,000, accounts receivable of $72,000, plant and equipment with a $192,000 book value, and total liabilities of $307,000. 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 $210,000.
(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:

Schizophrenia

A chronic mental disorder characterized by distorted thoughts, perceptions, emotions, language, sense of self, and behavior, often manifesting as hallucinations and delusions.

Deteriorate

The process of becoming progressively worse or declining in condition, quality, or function.

Schizophrenia

A long-term mental disorder involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception and actions.

Schizophrenia

A complex mental disorder that affects how a person thinks, feels, and behaves, often characterized by delusions, hallucinations, and disordered thinking.