REFERENCE: Ref.13_08 Hampton Company Is Trying to Decide Whether to Seek Liquidation

question 8

Essay

REFERENCE: Ref.13_08
Hampton Company is trying to decide whether to seek liquidation or reorganization.Hampton has provided the following balance sheet:
Additional information is as follows:
- The investments are currently worth $13,000.
- It is estimated that $32,000 of the accounts receivable are collectible.
- The inventory can be sold for $74,000.
- The prepaid expenses and the intangible assets have no net realizable value.
- The land and building are currently valued at $250,000.
- The equipment can be sold for $60,000.
- Administrative expenses (not yet recorded)are estimated to be $12,500.
- Accrued expenses include $17,000 of salaries payable ($11,000 to one employee and $3,000 each to two other employees).
- Accrued expenses include $7,000 of unpaid payroll taxes.
-Compute the amount of free assets after payment of liabilities with priority.

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