accounting

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John wants to dissolve his business.His balance sheet shows assets with a value of $250,000 in total. Liabilities are shown at 200,000 leaving equity of $50,000 for John.He only expects to get $180,00,000 for his assets when he sells them because some fixed assets are old and some accounts receivable will go uncollected.He would like to take his equity of $50,000 and leave the rest of the proceeds of the sale to pay his creditors. Can he do this? Can anyone please help with this?

  • accounting -

    Liabilities Assets
    Equity 50,000 Total Assets 250,000
    Liab. 200,000
    ---------------------------------------
    250,000 250,000
    =======================================
    If he takes his equity 50,000 then creditors will have only 180,000 - 50,000 i.e. 130,000 which is not sufficient. write answer yourself if he can do this or not.

  • accounting -

    If he only plans on getting 180k for the assets, and owes 200k in debts then there will be no equity left to cover the remaining 20k in liabilities. The way I read this, it will cost him 20k personally to shut down the business.

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