Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors and an additional $15,000 cash by borrowing from creditors. During Year 1 it received $25,000 cash revenues and paid $32,000 in cash expenses. The company then went out of business.
Required:
a)Explain the term, "business liquidation."
b)What amount of cash should Jessup Company have had on hand immediately before going out of business?
c)What amount of cash will Jessup's creditors receive?
d)What amount of cash will Jessup's stockholders receive?
Answer Key
Test name: chapter 11

Question

Quizplus · Accepted Answer

The Answer of Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors and an additional $15,000 cash by borrowing from creditors. During Year 1 it received $25,000 cash revenues and paid $32,000 in cash expenses. The company then went out of business.
Required:
a)Explain the term, "business liquidation."
b)What amount of cash should Jessup Company have had on hand immediately before going out of business?
c)What amount of cash will Jessup's creditors receive?
d)What amount of cash will Jessup's stockholders receive?
Answer Key
Test name: chapter 11

Jessup Company Was Founded in Year 1