Assignment Problem: On October 1, 2020, Drexel Inc. begins liquidation activities and adopts the liquidation basis of accounting. The book value of its assets totaled $500,000, including $5,000 in cash, and the book value of its liabilities totaled $490,000. Expected proceeds from reported assets other than cash at October 1, 2020 were: Receivables, $50,000; inventory, $120,000; and plant and equipment, $200,000. Expected costs of liquidating assets were $20,000.
During the three months ending December 31, 2020, the company collected $15,000 in receivables, sold inventory for $50,000, and paid liquidation costs of $6,000. Reported liabilities of $60,000 were paid. At December 31, 2020, estimated valuations on remaining assets, other than cash, and liabilities are as follows:
- Receivables, $30,000
- Inventory, $54,000
- Plant and equipment, $194,000
Newly identified unreported assets can be liquidated for an estimated $4,000. Expected remaining costs of liquidating assets are $15,000. A creditor holding a loan with a book value of $35,000 agrees to accept $20,000 as full payment.
Required:
Q1. Prepare a statement of changes in net assets in liquidation as of December 31, 2020.
Q2. Prepare a statement of net assets in liquidation as of December 31, 2020.
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