The plan of reorganizing for Taylor Companies, Inc., was approved by the court, stockholders, andcreditors on December 31, 20x1. The plan calls for a general restructuring of all of Taylor's debt. Thecompany's liability and capital accounts on December 31, 20X1, are as follows:Accounts Payable (postpetition)S 30,400Llabilities Subject to Compromise:Accounts Payable80,500Notes Payable, 9%, unsecured151,200Interest Payable37,200Bonds Payable, 10%200,000Common Stock, $1 par100,500Additional Paid-In Capital201,700Retained Earnings (deficit)(179,900TotalS 622,600A total of S30,400 of accounts payable has been incurred since the company filed its petition forrelief under Chapter 11. No other liabilities have been incurred since the petition was filed. Nopayments have been made on the liabilities subject to the compromise that existed on the petitiondate. Under the terms of the reorganization plan:The accounts payable creditors existing at the date the petition was filed agree to accept S73,255 ofnet accounts recelvable in full settlement of their claims.The holders of the 9 percent notes payable of S151,200 plus $17,200 of interest payable agree toaccept land having a fair value of $127,008 and a book value of S85,800.The holders of the 10 percent bonds payable of S200,000 plus S20,000 of Interest payable agree tocancel accrued interest of $15,000, accept cash payment of the remaining $5,000 of interest, andaccept a secured interest in the company's equipment in exchange for extending the term of thebonds for an additional year at no interest.The comman shareholders agree to reduce the deficit by changing the stock's par value to $2 pershare and eliminating any remaining deficit after recognition of all gains or losses from the debtrestructuring transactions specified in the plan of reorganization. The deficit will be eliminated byreducing additional paid-in capital.Required:a. Prepare a recovery analysis for the plan of reorganization, concluding with the total recovery ofeach liability and capital component of Taylor Companies.b. Prepare the journal entries to account for the discharge of the debt and the restructuring of thecommon equity in fulfillment of the plan of reorganization.

a. Taylor Companies, Inc. Plan of Reorganization Recovery Analysis December 31, 20X1…

The plan of reorganizing for Taylor Companies, Inc, was approved by the court, stockholders, and creditors on December 31, 20x1. The plan calls for a general restructuring of all of Taylor's debt. The company's liability and capital accounts on December 31, 20X1, are as follows: Accounts Payable (postpetlition) s 30,400 Llabilities Subject to Compromise: Accounts Payable 80,500 Notes Payable, 9%, unsecured 151,200 Interest Payable 37,200 Bonds Payable, 10% 200,000 Common Stock, S1 par 100,500 Additional Paid-Iin Capital 201.700 Retained Earnings (deficit) (178,900) S 622.600 Total A total of 530,400 of accounts payable has been incurred since the company filed its petition for relief under Chapter 11. No other liabilities have been incurred since the petition was filed. No payments have been made on the llablities subject to the compromise that existed on the petition date. Under the terms of the reorganization plan: The accounts payable creditors existing at the date the petition was filed agree to accept S73,255 of net accounts recelvable in full settlement of their claims. The holders of the 9 percent notes payable of $151,200 plus $17,200 of interest payable agree to accept land having a fair value of S127.008 and a book value of S95,800. The holders of the 10 percent bonds payable of S200,000 plus S20.000 of Interest payable agree to cancel accrued interest of $15,000o, accept cash payment of the remaining $5,000 of interest, and accept a secured interest in the company's equipment in exchange for extending the term of the bonds for an additional year at no interest. The comman shareholders agree to reduce the deficit by changing the stock's par value to $2 per share and eliminating any remaining deficit after recognition of all gains or losses from the debt restructuring transactions specified in the plan of reorganization. The deficit will be eliminated by reducing additional paid-in capital. Required: a. Prepare a recovery analysis for the plan of reorganization, concluding with the total recovery of each liability and capital component of Taylor Companies. b. Prepare the journal entries to account for the discharge of the debt and the restructuring of the common equity in fulfilment of the plan of reorganization.

The plan of reorganizing for Taylor Companies, Inc, was approved by the court, stockholders, and creditors on December 31, 20x1. The plan calls for a general restructuring of all of Taylor's debt. The company's liability and capital accounts on December 31, 20X1, are as follows: Accounts Payable (postpetlition) s 30,400 Llabilities Subject to Compromise: Accounts Payable 80,500 Notes Payable, 9%, unsecured 151,200 Interest Payable 37,200 Bonds Payable, 10% 200,000 Common Stock, S1 par 100,500 Additional Paid-Iin Capital 201.700 Retained Earnings (deficit) (178,900) S 622.600 Total A total of 530,400 of accounts payable has been incurred since the company filed its petition for relief under Chapter 11. No other liabilities have been incurred since the petition was filed. No payments have been made on the llablities subject to the compromise that existed on the petition date. Under the terms of the reorganization plan: The accounts payable creditors existing at the date the petition was filed agree to accept S73,255 of net accounts recelvable in full settlement of their claims. The holders of the 9 percent notes payable of $151,200 plus $17,200 of interest payable agree to accept land having a fair value of S127.008 and a book value of S95,800. The holders of the 10 percent bonds payable of S200,000 plus S20.000 of Interest payable agree to cancel accrued interest of $15,000o, accept cash payment of the remaining $5,000 of interest, and accept a secured interest in the company's equipment in exchange for extending the term of the bonds for an additional year at no interest. The comman shareholders agree to reduce the deficit by changing the stock's par value to $2 per share and eliminating any remaining deficit after recognition of all gains or losses from the debt restructuring transactions specified in the plan of reorganization. The deficit will be eliminated by reducing additional paid-in capital. Required: a. Prepare a recovery analysis for the plan of reorganization, concluding with the total recovery of each liability and capital component of Taylor Companies. b. Prepare the journal entries to account for the discharge of the debt and the restructuring of the common equity in fulfilment of the plan of reorganization.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 61P

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