Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 13, Problem 42P
To determine
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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 retained earnings deficit balance of $330,000 exists at the time of this reorganization.The company has the following asset accounts:
Book Value
Fair value
Accounts receivable
$100000
$80000
Inventory
112000
90000
Land and buildings
420000
500000
Equipment
78000
65000
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…
Smith Corporation has gone through bankruptcy and is ready to emerge as a reorganized entity on December 31, 2017. On this date, the company has the following assets (fair value is based on dis-counting the anticipated future cash flows):The company has a reorganization value of $800,000.Smith has 50,000 shares of $10 par value common stock outstanding. A deficit retained earnings balance of $670,000 also is reported. The owners will distribute 30,000 shares of this stock as part of the reorganization plan.The company’s liabilities will be settled as follows:• Accounts payable of $180,000 (existing at the date on which the order for relief was granted) will be settled with an 8 percent, two-year note for $35,000.• Accounts payable of $97,000 (incurred since the date on which the order for relief was granted) will be paid in the regular course of business.• Note payable—First Metropolitan Bank of $200,000 will be settled with an 8 percent, five-year note for $50,000 and 15,000 shares of…
Jaez Corporation is in the process of going through a reorganization. As of December 31, 2024, the company’s accountant has determined the following information although the company is still several months away from emerging from the bankruptcy proceeding.
Net Book Value
Fair Value
Assets
Cash
$ 31,000
$ 31,000
Inventory
53,000
55,000
Land
164,000
218,000
Buildings
228,000
268,000
Equipment
162,000
165,000
Allowed Claims
Expected Settlement
Liabilities as of the date of the order for relief
Accounts payable
$ 131,000
$ 28,000
Accrued expenses
38,000
12,000
Income taxes payable
30,000
26,000
Note payable (due 2027, secured by land)
108,000
108,000
Note payable (due 2029)
178,000
88,000
Liabilities since the date of the order for relief
Accounts payable
$ 68,000
Note payable (due 2026)
118,000
Stockholders' equity
Common stock
$ 208,000
Deficit
(241,000)
Required:
Prepare the balance sheet for Jaez…
Chapter 13 Solutions
Advanced Accounting
Ch. 13 - What does the term insolvent mean?Ch. 13 - Why should a company monitor the reporting of...Ch. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - What federal legislation governs most bankruptcy...Ch. 13 - What are the primary objectives of a bankruptcy...Ch. 13 - A bankruptcy case can begin with either a...Ch. 13 - A bankruptcy court enters an order for relief. How...
Ch. 13 - What is the difference between fully secured...Ch. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - What is the difference between a Chapter 7...Ch. 13 - What is the purpose of a statement of financial...Ch. 13 - In a bankruptcy liquidation, what actions does the...Ch. 13 - A trustee for a company that is being liquidated...Ch. 13 - If a company is not required to follow U.S. GAAP,...Ch. 13 - Prob. 19QCh. 13 - In determining whether a company needs to use the...Ch. 13 - In following the liquidation basis of accounting,...Ch. 13 - How does a company report its assets when the...Ch. 13 - What does the term debtor in possession mean?Ch. 13 - Who can develop reorganization plans in a Chapter...Ch. 13 - Prob. 25QCh. 13 - Prob. 26QCh. 13 - In a bankruptcy proceeding, what is a cram down?Ch. 13 - Prob. 28QCh. 13 - During reorganization, how should a companys...Ch. 13 - Prob. 30QCh. 13 - Prob. 31QCh. 13 - Under what conditions does a company that is...Ch. 13 - Prob. 33QCh. 13 - Prob. 34QCh. 13 - What are the objectives of the bankruptcy laws in...Ch. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - In a bankruptcy, which of the following statements...Ch. 13 - Prob. 5PCh. 13 - An order for relief creates an automatic stay that...Ch. 13 - Prob. 8PCh. 13 - Which of the following is the minimum limitation...Ch. 13 - On a statement of financial affairs, how are...Ch. 13 - What is a debtor in possession? a. The holder of a...Ch. 13 - How are anticipated administrative expenses...Ch. 13 - Prob. 13PCh. 13 - Which of the following is not an expected function...Ch. 13 - What is an inherent limitation of the statement of...Ch. 13 - What is a cram down? a. An agreement about the...Ch. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - How are assets to be reported when the liquidation...Ch. 13 - The New England Company has a debt to a bank of...Ch. 13 - On a balance sheet prepared for a company during...Ch. 13 - Which of the following is not a reorganization...Ch. 13 - What accounting is made for professional fees...Ch. 13 - Which of the following is necessary for a company...Ch. 13 - Prob. 26PCh. 13 - For a company emerging from bankruptcy, how are...Ch. 13 - The Walston Company is to be liquidated and has...Ch. 13 - Prob. 29PCh. 13 - Prob. 30PCh. 13 - Prob. 31PCh. 13 - Mondesto Company has the following debts:...Ch. 13 - A statement of financial affairs created for an...Ch. 13 - A company preparing for a Chapter 7 liquidation...Ch. 13 - Olds Company declares Chapter 7 bankruptcy. The...Ch. 13 - A company going through a Chapter 7 bankruptcy has...Ch. 13 - Pumpkin Company is going through bankruptcy...Ch. 13 - Prob. 38PCh. 13 - Prob. 39PCh. 13 - Kansas City Corporation holds three assets when it...Ch. 13 - Prob. 41PCh. 13 - Prob. 42PCh. 13 - Prob. 43PCh. 13 - Prob. 44PCh. 13 - The following balance sheet has been prepared by...Ch. 13 - Prob. 46PCh. 13 - Prob. 47P
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- Becket Corporation’s accountant has prepared the following balance sheet as of November 10, 2017, the date on which the company is to release a plan for reorganizing operations under Chapter 11 of the Bankruptcy Reform Act:The company has presented the following proposal:• The reorganization value of the company’s assets just prior to issuing additional shares below, selling the company’s investment, and conveying title to the land is set at $650,000 based on discounted future cash flows.• Accounts receivable of $20,000 are written off as uncollectible. Investments are worth $40,000, land is worth $80,000, the buildings are worth $300,000, and the equipment is worth $86,000.• An outside investor has been found to buy 7,000 shares of common stock at $11 per share.• The company’s investments are to be sold for $40,000 in cash with the proceeds going to the holders of the current note payable. The remainder of these short-term notes will be converted into $130,000 of notes due in 2021 and…arrow_forwardThe following balance sheet has been produced for Litz Corporation as of August 8, 2017, the date on which the company is to begin selling assets as part of a corporate liquidation:The following events occur during the liquidation process:• The investments are sold for $39,000.• The inventory is sold at auction for $48,000.• The money derived from the inventory is applied against the current notes payable.• Administrative expenses of $15,000 are incurred in connection with the liquidation.• The land and buildings are sold for $315,000. The long-term notes payable are paid.• The accountant determines that $34,000 of the accounts payable are liabilities with priority.• The company’s equipment is sold for $84,000.• Accounts receivable of $34,000 are collected. The remainder of the receivables is considered uncollectible.• The administrative expenses are paid.a. Prepare a statement of realization and liquidation for the period just described.b. What percentage of their claims should the…arrow_forwardThe Larisa Company is exiting bankruptcy reorganization with the following accounts: The company’s assets have a $760,000 reorganization value. As part of the reorganization, the company’s owners transferred 80 percent of the outstanding stock to the creditors. Prepare the journal entry that is necessary to adjust the company’s records to fresh start accounting.arrow_forward
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