18–15 VOLUNTARY SETTLEMENTS: PAYMENTS Jacobi Supply Company recently ran into certain financial difficulties that have resulted in the initiation of voluntary settlement procedures. The firm currently has $150,000 in outstanding debts and approximately $75,000 in liquidatable short-term assets. Indicate, for each of the following plans, whether the plan is an extension, a composition, or a combination of the two. Also indicate the cash payments and timing of the payments required of the firm under each plan. Each creditor will be paid ¢ 50 ¢ on the dollar immediately, and the debts will be considered fully satisfied. Each creditor will be paid ¢ 80 ¢ on the dollar in two quarterly installments of ¢ 50 ¢ and ¢ 30 ¢ . The first installment is to be paid in 90 days. Each creditor will be paid the full amount of its claims in three installments of ¢ 50 ¢ , ¢ 25 ¢ , and ¢ 25 ¢ on the dollar. The installments will be made in 60-day intervals, beginning in 60 days. A group of creditors with claims of $50,000 will be immediately paid in full; the rest will be paid ¢ 85 ¢ on the dollar, payable in 90 days.
P18–15 VOLUNTARY SETTLEMENTS: PAYMENTS Jacobi Supply Company recently ran into certain financial difficulties that have resulted in the initiation of voluntary settlement procedures. The firm currently has $150,000 in outstanding debts and approximately $75,000 in liquidatable short-term assets. Indicate, for each of the following plans, whether the plan is an extension, a composition, or a combination of the two. Also indicate the cash payments and timing of the payments required of the firm under each plan.
Each creditor will be paid ¢
50
¢
on the dollar immediately, and the debts will be considered fully satisfied.
Each creditor will be paid ¢
80
¢
on the dollar in two quarterly installments of ¢
50
¢
and ¢
30
¢
. The first installment is to be paid in 90 days.
Each creditor will be paid the full amount of its claims in three installments of ¢
50
¢
, ¢
25
¢
, and ¢
25
¢
on the dollar. The installments will be made in 60-day intervals, beginning in 60 days.
A group of creditors with claims of $50,000 will be immediately paid in full; the rest will be paid ¢
85
¢
on the dollar, payable in 90 days.
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