| Original | Acquired under Receivership | Total | |
|---|---|---|---|
| Assets Taken Over: | |||
| Cash | |||
| (see Receiver’s Cash Account) | $ 4,000.00 | $221,000.00 | $225,000.00 |
| Accounts Receivable | 120,000.00 | 80,000.00 | 200,000.00 |
| Merchandise | 60,000.00 | 70,000.00 | 130,000.00 |
| Other Property | 500,000.00 | 20,000.00 | 520,000.00; |
| $684,000.00 | $391,000.00 | $1,075,000.00 | |
| Liquidated | Continued | ||
| Disposition of Liabilities: | |||
| Notes Payable | $ 70,000.00 | $ 45,000.00 | 115,000.00 |
| Accounts Payable | 100,500.00 | 42,000.00 | 142,500.00 |
| Accrued Expenses | 14,000.00 | 14,000.00 | |
| Bonds Payable | 200,000.00 | 200,000.00 | |
| $184,500.00 | $287,000.00 | $1,546,500.00 | |
| Operations of the Receiver: | |||
| Expenses: | |||
| Merchandise originally taken over | $60,000.00 | ||
| Purchases | 70,000.00 | $130,000.00 | |
| Merchandise Returned to Owner | 20,000.00 | ||
| Cost of Goods Sold | $110,000.00 | ||
| Profit on Sales (carried down) | 21,000.00 | ||
| $131,000.00 | |||
| Selling Expenses | $10,000.00 | ||
| Expenses of Receiver’s Adm. | 7,500.00 | ||
| Losses on Realization: | |||
| Accounts Receivable: | 25,000.00 | ||
| Other Property | 6,000.00 | $48,500.00 | |
| Values Returned to Owner: | $48,500.00 | ||
| Cash | $ 500.00 | ||
| Accounts Receivable | 75,000.00 | ||
| Merchandise | 20,000.00 | ||
| Other Property | 445,000.00 | ||
| $540,500.00 | |||
Kay Corporation
Realization and Liquidation Account
(Continued)
| Original | Acquired under Receivership | Total | |
|---|---|---|---|
| Liabilities Assumed: | |||
| Notes Payable | $ 80,000.00 | $ 35,000.00 | $115,000.00 |
| Accounts Payable | 110,000.00 | 32,500.00 | 142,500.00 |
| Accrued Expenses | 14,000.00 | 14,000.00 | |
| Bonds Payable | 200,000.00 | 200,000.00 | |
| $404,000.00 | $67,500.00 | $471,500.00 | |
| Disposed of | Continued | ||
| Disposition of Assets: | |||
| Cash (see Receiver’s Cash Acct.) | $224,500.00 | $ 500.00 | 225,000.00 |
| Accounts Receivable: | |||
| Amount Collected$100,000.00 | |||
| Loss on Bad Debts25,000.00 | 125,000.00 | 75,000.00 | 200,000.00 |
| Merchandise: | |||
| Sold for (see next section) $131,000.00 | |||
| Profit on 21,000.00 | 110,000.00 | 20,000.00 | 130,000.00 |
| Other Property: | |||
| Sold for$ 69,000.00 | |||
| Loss on 6,000.00 | 75,000.00 | 445,000.00 | 520,000.00 |
| $534.500.00 | $540,500.00 | $1,546,500.00 | |
| Operations of the Receiver: | |||
| Income: | |||
| Sales | $131,000.00 | ||
| $131,000.00 | |||
| Profit on Sales (brought down) | $21,000.00 | ||
| Rental | 1,000.00 | ||
| Decrease in Value of Business | |||
| under Receivership | 26,500.00 | ||
| $48,500.00 | |||
| Values Returned to Owner: | |||
| Notes Payable | $ 45,000.00 | ||
| Accounts Payable | 42,000.00 | ||
| Bonds Payable | 200,000.00 | ||
| $287,000.00 | |||
Receiver’s Cash Account
| Balance Taken Over by Receiver | $ 4,000.00 | Purchase | $ 12,500.00 | |
| Sales | $ 51,000 | Other Property | 10,000.00 | |
| Accts. Rec. | 100,000 | Selling Expenses. | 10,000.00 | |
| Other Property | 69,000 | Receiver’s Administration | 7,500 | |
| Rentals | 1,000 | Accrued Expenses | 14,000.00 | |
| Notes Payable | 70,000.00 | |||
| Cash Acquired under | Accounts Payable | 100,500.00 | ||
| Receivership | 221,000.00 | Balance Returned to Owner | 500.00 | |
| $225,000.00 | $225,000.00 | |||
Comments on Problem. Under the method of solution presented here, it will be noted that the trustee is held to an accounting for both the original assets which have been turned over to him, and all new assets acquired during the course of his receivership. Inasmuch as all income items, usually from sales and, in this case, from rentals also, are reflected in the assets acquired under the receivership, the receiver is thus charged with the income received by him.
In rendering his accounting for the assets acquired, he must make a full accounting for all values turned over to him. Accordingly, in the “Disposition of Assets” section are shown not only the amount realized from the sale of the assets, but also the loss incurred in their sale. This makes possible the tying up of the assets accounted for with the value at which they were turned over to the receiver. It is to be noted that in the case of merchandise there is a profit on sales and not a loss. This is shown by setting up the merchandise disposed of at its sales figure—as is also indicated in the next section below under the head of “Operations of the Receiver: Income”—and deducting from it the profit made as shown by the next section contra under the head of “Operations of the Receiver: Expenses.” The difference between these two figures of merchandise at sales price and the profit on the merchandise gives the value of the merchandise with which the receiver is charged. By showing in parallel columns the values disposed of and the values still on hand, the final column accounts for the full value with which the receiver has been charged contra.
As a supplement to his accounting for the assets and liabilities, the receiver’s expenses and income are incorporated as a part of the statement. This is done not with the idea that he is to be charged with the one and credited with the other, for the principles of debit and credit, as stated above, have little logical application to the statement, but in order to bring onto the face of the statement informational data which are essential to an intelligent reading of his accounting.
The difference between the two sides of this section of the statement—in this case $26,500—is the decrease in net worth of the business during the period of the receivership. This figure is capable of proof by comparing the net worth of the business as originally turned over to the receiver with the net worth as turned back by him. In the one case it is $280,000, as shown by the difference between total assets of $684,000 and liabilities of $404,000. In the other case it is $253,500, as shown by the difference between the total assets of $540,500 returned to the owner and the total liabilities of $287,000 turned back.
When this information is given in the one statement, the latter becomes somewhat complex, but by careful analysis all the information desired can be secured from it and the attached receiver’s cash summary.