On February 1, 2012, Clover Company filed a petition for reorganization under the bankruptcy statutes. The court approved the plan on September 1, 2012, including the following provisions: 1. Unsecured creditors of open accounts amounting to $71,600 are paid 42 cents on the dollar in full settlement. 2. Clover Company is to exchange accounts receivable in the face amount of $92,000 and an allowance for uncollectible accounts of $19,450 for the full settlement of $132,400 owed on open account to one of its major unsecured creditors. The estimated fair value of the receivables is $69,000. 3. Accrued expenses of $14,620, representing priority items, are to be paid in full. 4. Clover Company's only other major unsecured creditor agreed to a five-year extension of the $300,000 principal owed him on a 10% note payable. Accrued interest on the note on September 1, 2012, amounts to $27,000, one-third of which is to be paid in cash and the remainder canceled. In addition, no interest is to be charged during the remaining five years to maturity of the note. Required: Prepare journal entries on the books of Clover Company to give effect to the fore going provisions.

On February 1, 2012, Clover Company filed a petition for reorganization under the bankruptcy statutes. The court approved the plan on September 1, 2012, including the following provisions: 1. Unsecured creditors of open accounts amounting to $71,600 are paid 42 cents on the dollar in full settlement. 2. Clover Company is to exchange accounts receivable in the face amount of $92,000 and an allowance for uncollectible accounts of $19,450 for the full settlement of $132,400 owed on open account to one of its major unsecured creditors. The estimated fair value of the receivables is $69,000. 3. Accrued expenses of $14,620, representing priority items, are to be paid in full. 4. Clover Company's only other major unsecured creditor agreed to a five-year extension of the $300,000 principal owed him on a 10% note payable. Accrued interest on the note on September 1, 2012, amounts to $27,000, one-third of which is to be paid in cash and the remainder canceled. In addition, no interest is to be charged during the remaining five years to maturity of the note. Required: Prepare journal entries on the books of Clover Company to give effect to the fore going provisions.

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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