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April 2008 q20

J

Jia Syuen

Very Active Member
i) Calculate the amount that Vest is likely to receive from Rough in the event that the company is wound up.

Can anyone explain how to arrive $250,000 for the answer? Thanks.
 
Hi

If we use the info in the bullet points to adjust the values of Rough's assets, then the realisable value of the assets is:
Non-current assets : 0 intangibles + 6m property, plant & equipment
Current assets : 2.5m
So, total assets - 8.5m

Secured loans will be repaid first, using 7m, leaving 1.5m of assets to meet the liabilities to the unsecured creditors.
There is a total of 3m of unsecured liabilties, so unsecured creditors are likely to get half of what they are owed.

So, Vest likely to receive half of the 500,000 it is owed.

Hope this helps
Lynn
 
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