A company preparing for a Chapter 7 liquidation has listed the following liabilities:Note payable A of $110,000 secured by land having a book value of $60,000 and a fair value of $80,000Note payable B of $140,000 secured by a building having a $70,000 book value and a $50,000 fair value.Note payable C of $70,000, unsecured.Administrative expenses payable of $30,000.Accounts payable of $130,000.Income taxes payable of $40,000.The company also has these other assets:Cash of $16,800.Inventory of $120,000 but with a net realizable value of $70,000.Equipment of $110,000 but with a net realizable value of $60,000Based on this information, how much will each of the company's liabilities be paid at liquidation?Payment on note payable APayment on note payable BPayment on note payable CPayment on administrative expensesPayment on accounts payablePayment on income taxes payableAmount$ 89,154$ 77,463$ 21,360$ 9,154$ 39,669 x$ 40,000

Step 1: Calculation of Free assets after payment of liabilities with priority.Free assets…

Answered: A company preparing for a Chapter 7…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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