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Legal Reorganizations and Liquidations Chapter 13 Advanced Accounting Assignment




Question;Problem 13-22 [LO3, LO5, LO6]A company is to be liquidated and has the following liabilities:$Income taxesNotes payable(secured by land)Accounts payableSalaries payable (evenly divided between two employees)Bonds payableAdministrative expenses for liquidation10,200162,000106,00027,00091,00041,000The company has the following assets:Book ValueCurrent assetsLandBuildings and equipment$ 101,000121,000121,000Fair Value$ 56,000111,000171,000How much money will the holders of the notes payable collect following the liquidation?Total amount collected$Problem 13-23 [LO3, LO6]Xavier Company is going through a Chapter 7 bankruptcy. All assets have been liquidated, and the company retainsonly $25,800 in free cash. The following debts, totaling $41,050, remain:Government claims to unpaid taxesSalary during last month owed to Mr. Key (not an officer)Administrative expensesSalary during last month owed to Ms. Rankin (not an officer)Unsecured accounts payable$6,60018,4253,0505,8257,150Indicate how much money will be paid to the creditor associated with each debt. (Be sure to list liabilities in theorder of priority.)Problem 13-24 [LO3, LO5]Ataway Company has severe financial difficulties and is considering filing a bankruptcy petition. At this time, it has thefollowing assets (stated at net realizable value) and liabilities:Assets (pledged against debts of $72,000)Assets (pledged against debts of $134,000)Other assetsLiabilities with priorityUnsecured creditors$ 120,00052,00082,00059,000202,000In a liquidation, how much money would be paid on the partially secured debt?Payment on partially secured debt$Problem 13-25 [LO3, LO5, LO6]Chesterfield Company has cash of $69,000, inventory worth $128,000, and a building worth $149,000.Unfortunately, the company also has accounts payable of $199,000, a note payable of $99,000 (secured by theinventory), liabilities with priority of $26,600, and a bond payable of $188,000 (secured by the building).How much money will the holder of the bond expect to receive?Total amount received by bond holdersProblem 13-26 [LO3, LO6]$Mondesto Company has the following:creditorsLiabilities with prioritySecured liabilities:Debt 1, $226,000, value of pledged assetDebt 2, $188,000, value of pledged assetDebt 3, $128,000, value of pledged assetUnsecured$ 238,000118,000188,000108,000156,000The company also has a number of other assets that are not pledged in any way. The creditors holding Debt 2 want toreceive at least $161,600.For how much do these free assets have to be sold so that the creditors associated with Debt 2 receive exactly$161,600? (Round your percentage answers in calculations to the nearest whole percent.)Sale price$Problem 13-27 [LO3, LO5]A statement of financial affairs created for an insolvent corporation that is beginning the process of liquidationdiscloses the following data (assets are shown at net realizable values):Assets pledged with fully secured creditorsFully secured liabilitiesAssets pledged with partially secured creditorsPartially secured liabilitiesAssets not pledgedUnsecured liabilities with priorityAccounts payable (unsecured)$ 250,000175,000405,000540,000325,000235,000415,000a. This company owes $28,000 to an unsecured creditor (without priority). How much money can this creditorexpect to collect?Expected amount by creditor$b. This company owes $150,000 to a bank on a note payable that is secured by a security interest attached to propertywith an estimated net realizable value of $105,000. How much money can this bank expect to collect?Expected amount by bank$Problem 13-31 [LO8]Pumpkin Company is going through bankruptcy reorganization. It has a $310,000 note payable incurred prior to the orderfor relief. The company believes that the note will be settled for $82,000 in cash. It is also possible that the creditorwill instead take a piece of land that cost the company $72,000 but is worth $94,000. On a balance sheet during thereorganization period, identify the legitimate amount that can be claimed by the creditors.$310,000$176,000$228,000$82,000Problem 13-32 [LO9]A company is coming out of reorganization with the following accounts:Book ValueReceivablesInventoryBuildingsLiabilitiesCommon stockAdditional paid-in capitalRetained earnings (deficit)$93,000213,000313,000313,000343,00046,000(83,000)Fair Value$ 116,000236,000426,000313,000The company?s assets have a $833,000 reorganization value. As part of the reorganization, the company?s ownerstransferred 75 percent of the outstanding stock to the creditors.Prepare the journal entry that is necessary to adjust the company's records to fresh start accounting.DebitGeneral JournalCreditProblem 13-33 [LO8]Addison Corporation is currently going through a Chapter 11 bankruptcy. The company has the following accountbalances for the current year.Advertising expenseCost of goods soldDepreciation expenseInterest expenseInterest revenueLoss on closing of branchProfessional feesRent expenseRevenuesSalaries expenseDebit$ 43,000230,00041,0007,000Credit$ 41,000128,00090,00035,000600,00089,000Prepare an income statement for this organization. The effective tax rate is 20 percent (realization of any taxbenefits is anticipated). (Amounts to be deducted and losses should be indicated with minus sign, exceptindividual expenses which should be entered as positive values.)ADDISON CORPORATIONIncome Statement$Costs and expenses:$Earnings before reorganization items and tax effectsReorganization items:$Problem 13-35 [LO8]Jaez Corporation is in the process of going through a reorganization. As of December 31, 2013, the company?saccountant has determined the following information although the company is still several months away fromemerging from the bankruptcy proceeding.Fair Value$ 32,00056,000219,000269,000166,000Book ValueCashInventoryLandBuildingsEquipment$ 32,00054,000167,000229,000163,000AllowedClaimsExpectedSettlementLiabilities as of the date of the order for relief$Accounts payableAccrued expensesIncome taxes payableNote payable (due 2016, secured by land)Note payable (due 2018)Liabilities since the date of the order for reliefAccounts payableNote payable (due 2015)Stockholders? equityCommon stockDeficit132,000 $ 29,00039,00013,00031,00027,000109,000109,000179,00089,000$69,000119,000$209,000(242,000)Prepare a balance sheet in appropriate form. (Be sure to list assets and liabilities in the order of their liquidity.Negative amounts should be indicated by a minus sign.)JAEZ CORPORATIONBalance SheetDecember 31, 2013Current Assets:$$Land, Buildings, and Equipment:Total Assets$Liabilities not Subject to CompromiseCurrent Liabilities:Long-term Liabilities:$TotalLiabilities Subject to Compromise$Total LiabilitiesStockholders' Equity:$Total Liabilities and Shareholders' (deficit)$Problem 13-36 [LO9]Ristoni Company is in the process of emerging from a Chapter 11 bankruptcy. It will apply fresh start accounting asof December 31, 2013. The company currently has 21,000 shares of common stock outstanding with a $189,000 parvalue. As part of the reorganization, the owners will contribute 17,000 shares of this stock back to the company. Aretained earnings deficit balance of $588,000 exists at the time of this reorganization.The company has the following asset accounts:Book ValueAccounts receivableInventoryLand and buildingsEquipment$ 102,000114,000362,00056,000$Fair Value56,000101,000423,00043,000The company?s liabilities will be settled as follows. Assume that all notes will be issued at reasonable interest rates.? Accounts payable of $91,000 will be settled with a note for $8,000. These creditors will also get 2,000 shares ofthe stock contributed by the owners.? Accrued expenses of $46,000 will be settled with a note for $7,000.? Note payable of $111,000 (due 2017) was fully secured and has not been renegotiated.? Note payable of $305,000 (due 2016) will be settled with a note for $61,000 and 10,000 shares of the stockcontributed by the owners.? Note payable of $280,000 (due 2014) will be settled with a note for $82,000 and 5,000 shares of the stockcontributed by the owners.? Note payable of $200,000 (due 2015) will be settled with a note for $121,000.The company has a reorganization value of $726,000.Prepare all journal entries for Ristoni so that the company can emerge from the bankruptcy proceeding. (Do notround intermediate calculations. Round your answers to the nearest dollar amount.)General JournalTo adjust accounts to market value as part of fresh startTo record shares turned in upon reorganization.To record settlement of accounts payable.Debitaccounting.CreditTo record settlement of accrued expenses.To record settlement of note payable due in 2016.To record settlement of note payable due in 2014.To record settlement of note payable due in 2015.To adjust additional paid in capital, close out gain & deficitbalance.


Paper#39948 | Written in 18-Jul-2015

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