Question

problem 2-18 (static) calculate cash available upon liquidation of business lo 2-2, 2-3, 2-6
kimber company 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
$ 39,000
accounts receivable
$ 96,000
merchandise inventory
$ 150,000
total current assets
$ 270,000
land
$ 59,000
buildings and equipment
$ 400,000
less: accumulated depreciation
(120,000)
total land, buildings, and 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

Explanation:

Step1: Calculate total assets

Total assets = Total current assets + (Land + Buildings and equipment - Accumulated depreciation)
$\$270,000 + (\$50,000 + \$400,000 - \$120,000) = \$270,000 + \$330,000 = \$600,000$

Step2: Calculate total liabilities

Total liabilities = Total current liabilities + Long-term debt
$\$190,000 + \$130,000 = \$320,000$

Step3: Calculate cash available for equity holders

Cash available = Total assets - Total liabilities
$\$600,000 - \$320,000 = \$280,000$

Answer:

$\$280,000$