Book Value Falr Value Accounts receivable $ 100,000 $ 80,000 Inventory.... Land and buildings 420,000 500,000 Equipment.. 78,000 65,000
Ristoni Company is in the process of emerging from a Chapter 11 bankruptcy. It will apply fresh start accounting as of December 31, 2017. The company currently has 30,000 shares of common stock outstanding with a $240,000 par value. As part of the reorganization, the owners will contribute 18,000 shares of this stock back to the company. A
The company has the following asset accounts:
The company’s liabilities will be settled as follows. Assume that all notes will be issued at reasonable interest rates.
Accounts payable of $80,000 will be settled with a note for $5,000. These creditors will also get 1,000 shares of the stock contributed by the owners.
Accrued expenses of $35,000 will be settled with a note for $4,000.
• Note payable of $100,000 (due 2021) was fully secured and has not been renegotiated.
• Note payable of $200,000 (due 2020) will be settled with a note for $50,000 and 10,000 shares of the stock contributed by the owners.
• Note payable of $185,000 (due 2018) will be settled with a note for $71,000 and 7,000 shares of the stock contributed by the owners.
• Note payable of $200,000 (due 2019) will be settled with a note for $110,000.
The company has a reorganization value of $780,000.
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