Olds Company declares Chapter 7 bankruptcy. The following are the asset and liability book values at thattime. Administrative expenses are estimated to be $30,000:CashAccounts receivableInventoryLand (secures note A)Building (secures bonds)EquipmentAccounts payableTaxes payable togovernmentNote payable ANote payable BBonds payable$ 42,00078,000 (worth $46,000)88,000 (worth $74,000)(worth218,000Amount to be received$178,000)(worth418,000$356,000)138,000 (worth unknown)198,00038,000206,000268,000318,000The holders of note payable B want to collect at least $120,600.To achieve this goal, how much does the company have to receive in the liquidation of its equipment?

When a company undergoes liquidation, unsecured creditors are typically paid after secured creditors…

Answered: Olds Company declares Chapter 7…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 08-48 (Algo) [LO 8-1, 8-7, 8-8] Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance sheet showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 37,750 143,200 Net cash flow 50,750 (40,600) 22,000 (4,400) Required: The purchaser paid a lump-sum price of $316,000 cash for the business. The sales contract stipulates that the FMV of the business Inventory is $156,400, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.
Eleven years ago, Lynn, Incorporated purchased a warehouse for $315,000. This year,the corporation sold the warehouse to Firm D for $80,000 cash and D’s assumption ofa $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-linedepreciation on the warehouse.Required:b. What is the character of this gain?c. How would your answers change if Lynn was a noncorporate business?
5
Which of the following best describes the IRC $ 165 reportable loss transaction thresholds applicable to corporations? a. Single year loss of $50,000. b. Single year loss of $2 million and a cumulative loss of $4 million. c. Single year loss of $4 million and a cumulative loss of $20 million. d. Single year loss of $10 million and a glimmulative loss of $20 million.
Eleven years ago, Lynn, Incorporated purchased a warehouse for $315,000. This year,the corporation sold the warehouse to Firm D for $80,000 cash and D’s assumption ofa $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-linedepreciation on the warehouse.Requiredc. How would your answers change if Lynn was a noncorporate business?
On June 30, 2002, Free Company had outstanding 8%, P1,000,000 face amount, 15-year bonds maturing on June 30 , 2009. Interest is payable on June 30 and December 31. The unamortized balance on June 30, 2002, in the bond discount and bond issue costs accounts were P35,000 and P10,000 respectively. Free acquired all of these bonds at 94 on June 30, 2002, and retired them. Ignoring income taxes, how much gain should Free report on this early extinguishment of debt? P15,000 P25,000 P35,000 P60,000
(b) Gassy Stores sells $400,000 of 12% bonds on June 1, 2022. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2026. The market rate of similar investments is 10%. On December 1, 2024, Gassy Stores retired the bond for $400,000. The company closes its books on December 31. Requirements: (Show all workings) I. Calculate the proceeds from the sale of the bond. Clearly show the amount of the premium or discount and state two reasons which support the premium or discount calculated. II. Prepare a bond amortization schedule for the bond’s life III. Prepare all the journal entries for 2022, 2023 & 2024
The Walston Company is to be liquidated. It has the following liabilities: Income taxes Notes payable (secured by land) Accounts payable Salaries payable (evenly divided between two employees) Bonds payable Administrative expenses for liquidation The company has the following assets: $ 7,600 136,000 93,000 14,000 78,000 28,000 Book Value Fair Value Current assets $ 88,000 Land 108,000 Buildings and equipment 108,000 $ 43,000 98,000 132,000 Required: How much money will the holders of the notes payable collect following liquidation? Total amount collected
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Charles Turner Construction Incorporated is a creditor of ABC Company. Turner constructed the office building in which ABC has its headquarters. At the time the building was constructed, Turner attached a lien on the building as security for the $80,000 note which Turner accepted. Now, ABC Company has filed for bankruptcy and it is estimated that the building has a net realizable value of $70,000. Turner’s status is: Fully Secured Partially Secured Unsecured A. Yes No Yes B. No No Yes C. No Yes No D. No Yes Yes E. Yes No No
A corporation sold a piece of equipment during the tax year for $85,200. The accounting records show that its cost basis is $190,000 and the accumulated depreciation is $150,000. Does the company owe additional taxes due to this sale? no excel

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