Stinespring Company Was Founded in 2012

question 12

Essay

Stinespring Company was founded in 2012. It acquired $35,000 cash by issuing stock to investors and an additional $20,000 cash by borrowing from creditors. During 2012 it received $15,000 cash revenues and paid $22,000 in cash expenses. The company then went out of business.
Required:
a) Explain the term, "business liquidation."
b) What amount of cash should Stinespring Company have had on hand immediately before going out of business?
c) What amount of cash will Stinespring's creditors receive?
d) What amount of cash will Stinespring's stockholders receive?

---

Definitions:

Ending Inventory

The total value of goods available for sale at the end of an accounting period.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company.

LIFO

A method of inventory valuation called "Last-In, First-Out," where the most recently acquired items are the first to be expensed.

Tax Advantage

A tax advantage refers to the economic bonus that applies to certain investments or transactions that are favored by tax policy, allowing for a reduction in tax liabilities.