Hampton Company Is Trying to Decide Whether to Seek Liquidation

question 74

Essay

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 assets available for unsecured creditors after payment of liabilities with priority.

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Definitions:

Deposition

The geological process by which sediments, soil, and rocks are added to a landform or landmass, often carried by wind, water, or ice.

Cutbank

A steep cut or slope formed by lateral erosion of a stream, especially on the outside bend of a channel.

Gradient

The rate of change of a quantity (e.g., temperature, pressure, or elevation) with respect to distance in a given direction.

Headwaters

The source of a river or stream, generally found in the high elevation areas from which the river originates.