Equipment with a book values of $120,000 is sold in a liquidation process for cash of $110,000.This equipment was security for a $150,000 bank loan.Any remainder is consider unsecured without priority.How would this transaction be reported on the Statement of Realization and Liquidation?

Question

Quizplus · Accepted Answer

This transaction impacts the Statement of Realization and Liquidation in multiple ways: it reduces noncash assets by the book value of the equipment ($120,000), results in a loss because the equipment sold for less than its book value ($110,000 cash received vs. $120,000 book value, resulting in a $10,000 loss), and involves a disbursement of cash to the bank ($110,000), reducing the partially secured liability (the bank loan of $150,000) and increasing the unsecured without priority liability by the shortfall amount ($40,000, which is the difference between the loan amount and the cash received).

Equipment with a Book Values of $120,000 Is Sold in a Liquidation