CORPORATE LIQUIDATION(Quick Notes)
Quicknotes Topics
AFAR: A Fastrack of Partnership Formation and its Operation
AFAR: A Fastrack of Partnership Dissolution
AFAR: A Fastrack of Partnership Liquidation
AFAR: A Fastrack of Corporate Liquidation
AFAR: A Fastrack of Instalment Sales
AFAR: A Fastrack of Consignment Sales
AFAR: A Fastrack of Franchise Accounting
AFAR: A Fastrack of Long-Term Contracts
FAR: A Fastrack of Inventories
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Recommended Basic Casio Calculators for the CPA Exam: A Buyer’s Guide
INSOLVENCY- it is an inability to pay off its liabilities as they become due and demandable. In Legal View, it is a financial condition in which the sum of all debts is greater than all of its assets at a fair valuation.
Voluntary insolvency- insolvent entity itself files a
petition at Regional Trial Court, the debtor has insufficient assets to pay the
debts in full, while Involuntary Insolvency-
the petitions is made by two or more creditors, and the debtor committed
the act of solvency.
Role of Creditors- outside creditors appoint a trustee to
manage the debtor’s state
Roles of trustees
a.
Continue operating the debtor’s business if
directed by the court
b.
Realizes free assets of the debtor’s estate
c. Pay
cash to unsecured creditors
Role of Accountant- concerned
with proper reporting of the financial condition of the debtor and adequate
accounting and reporting for the trustee.
Statement of Affairs- financial condition prepared for a corporation entering into the stage of liquidation or bankruptcy.
1. Assets
a. Assets pledged with fully secured creditors-
expected to realize an amount at least sufficient to satisfy the related debt.
b. Assets pledged with partially secured creditors-
expected to realize an amount below the related debt.
c. Free assets- are not pledged and are available
to satisfy the claims of creditors with priority, partially secured creditors,
and unsecured creditors.
2. Liabilities
a. Fully secured liabilities- expect to be paid in
full as a result of their having sufficient collateral to satisfy the
indebtedness.
b. Partially secured liabilities- have collateral,
the proceeds of which are expected to be insufficient to satisfy the
indebtedness.
c. Unsecured Liabilities with priority- have
priority under the law (Section 50 Insolvency Law).
d. Unsecured Liabilities (General Creditors) - have
no collateral relating to their indebtedness.
3. Owner’s Equity Deficiency or Capital
-balances summarizing the interest of the owners in the business are reported under the heading “Capital” or “Stockholder’ Equity.”
-balances summarizing the interest of the owners in the business are reported under the heading “Capital” or “Stockholder’ Equity.”
ESTIMATED RECOVERY %, OR DIVIDEND TO GENERAL UNSECURED
CREDITORS= NET FREE ASSETS/TOTAL
UNSECURED CREDITORS
STATEMENT OF REALIZATION AND LIQUIDATION- an activity statement progress toward the liquidation of a debtor’s state. It shows the actual transactions that transpired during the period covered
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| Statement of Realization and Liquidation |
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| Statement of Realization and Liquidation |
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| Statement of Affairs |
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