Kimber Co. is in the process of liquidating and going out of business. The firm’s accountant has provided the following balance sheet and additional information: Assets Cash $ 30,000 Accounts receivable 90,000 Merchandise inventory 150,000 Total current assets $ 270,000 Land $ 50,000 Buildings & equipment 400,000 Less: Accumulated depreciation (120,000 ) Total land, buildings, & equipment 330,000 Total assets $ 600,000 Liabilities and Stockholders’ Equity Accounts payable $ 80,000 Notes payable 110,000 Total current liabilities $ 190,000 Long-term debt 130,000 Total liabilities $ 320,000 Stockholders’ Equity Common stock, no par $ 100,000 Retained earnings 180,000 Total stockholders’ equity 280,000 Total liabilities and stockholders’ equity $ 600,000 It is estimated that all but 20 percent of the accounts receivable can be collected, and that the merchandise inventory can be disposed of in a liquidation sale for 70 percent of its cost. Buildings and equipment can be sold at $60,000 above book value (the difference between original cost and accumulated depreciation shown on the balance sheet), and the land can be sold at its current appraisal value of $85,000. In addition to the liabilities included in the balance sheet, $5,000 is owed to employees for their work since the last pay period, and interest of $10,000 has accrued on notes payable and long-term debt. Required: a. Calculate the amount of cash that will be available to the stockholders if the accounts receivable are collected, the other assets are sold as described, and all liabilities and other claims are paid in full.
