REFERENCE: Ref.13_07 Mount Inc.was a Hardware Store That Operated in Boise,Idaho.Management Made

question 23

Essay

REFERENCE: Ref.13_07
Mount Inc.was a hardware store that operated in Boise,Idaho.Management made some poor inventory acquisitions that loaded the store with unsalable merchandise.Due to the decline in revenues,the company became insolvent.Following is a trial balance as of March 15,2009,the day the company filed for a Chapter 7 liquidation. Company officials believed that sixty percent of the accounts receivable could be collected if the company was liquidated.The building and land had a fair value of $97,500,while the equipment was worth $24,700.The investments represented shares of a nationally traded company that could be sold at the time for $27,300.The entire inventory could be sold for only $42,900.Administrative expenses necessary to carry out a liquidation would have approximated $20,800.
-Assume that the company was being liquidated and that the following transactions occurred:
Accounts receivable of $23,400 were collected.
All of the company's inventory was sold for $52,000.
Additional accounts payable of $13,000 incurred for various expenses such as utilities and maintenance were discovered.
The land and building were sold for $92,300.
The note payable due to the Idaho Savings and Loan was paid.
The equipment was sold at auction for only $14,300 with the proceeds applied to the note owed to the Second National Bank.
The investments were sold for $27,300.
Administrative expenses totaled $26,000 as of July 26,2009,but no payment had yet been made.
Required:
Prepare a statement of realization and liquidation for the period from March 15 through July 26,2009 .

Explain the purpose and use of an aging schedule in managing receivables.

Understand the concept of credit cost curve and its implications for credit policy.

Define credit period and identify factors influencing it.

Understand the concept of credit scoring and its application in credit evaluation.

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Definitions:

Non-Eligible Dividends

Dividends that do not qualify for the enhanced dividend tax credit in certain jurisdictions, often associated with smaller businesses.

Average Tax Rate

The proportion of total income that an individual or corporation pays in taxes, calculated by dividing the total tax by the taxable income.

Interest Income

The revenue earned from deposit accounts or investments through the interest payments received.