When does the liquidation basis of accounting first have to be applied to financial statements of a liquidating entity to be viewed as in conformity with U.S. GAAP? a. When an involuntary bankruptcy petition is approved by the court. b. When liquidation is imminent. c. When the first asset is sold. d. At least 90 days before the final asset is sold.

When does the liquidation basis of accounting first have to be applied to financial statements of a liquidating entity to be viewed as in conformity with U.S. GAAP? a. When an involuntary bankruptcy petition is approved by the court. b. When liquidation is imminent. c. When the first asset is sold. d. At least 90 days before the final asset is sold.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 27CYBK

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Choose the correct. When does the liquidation basis of accounting first have to be applied to financial statements of a liquidating entity to be viewed as in conformity with U.S. GAAP?a. When an involuntary bankruptcy petition is approved by the court.b. When liquidation is imminent.c. When the first asset is sold.d. At least 90 days before the final asset is sold.
If a company is not required to follow U.S. GAAP, a statement of realization and liquidation can be prepared during liquidation. What information can be gained from this statement?
If a bankruptcy is deemed likely to occur and is reasonably estimated, what would be the recognition and disclosure requirements for the company?
Which one of the following is a direct bankruptcy cost? A.Loss of customer goodwill resulting from a bankruptcy filing B.Legal and accounting fees related to a bankruptcy proceeding C,Any financial distress cost D.Management time spent on a bankruptcy proceeding
Why should a company monitor the reporting of goodwill prior to the filing of a bankruptcy petition?
Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended February 1, 2020, Does the company separately report current assets and long-term assets, as well as current liabilities and long-term liabilities? Are any investments shown as a current asset? Why? In which liability account would the company report the balance of its gift card liability? What method does the company use to depreciate its property and equipment?
The Jackston Company is to be liquidated as a result of bankruptcy. Until the liquidation occurs, on what basis are its assets reported?a. Present value calculated using an appropriate effective rate.b. Net realizable value.c. Historical cost.d. Book value.
What is a debtor in possession?a. The holder of a note receivable issued by an insolvent company prior to the granting of an order for relief.b. A fully secured creditor.c. The ownership of an insolvent company that continues to control the organization during a bankruptcy reorganization.d. The stockholders in a Chapter 7 bankruptcy.
In a bankruptcy, which of the following statements is true? a. An order for relief results only from a voluntary petition. b. Creditors entering an involuntary petition must have debts totaling at least $21,625. c. Secured notes payable are considered liabilities with priority on a statement of affairs. d. A liquidation is referred to as a Chapter 7 bankruptcy, and a reorganization is referred to as a Chapter 11 bankruptcy.
Choose the correct. What is a debtor in possession?a. The holder of a note receivable issued by an insolvent company prior to the granting of an order for relief.b. A fully secured creditor.c. The ownership of an insolvent company that continues to control the organization during a bankruptcy reorganization.d. The stockholders in a Chapter 7 bankruptcy.
The following selected circumstances relate to pending lawsuits for Erismus, Incorporated Erismus’s fiscal year ends on December 31. Financial statements are issued in March 2025. Erismus prepares its financial statements according to U.S. GAAP. Required: Indicate the amount Erismus would record as an asset, a liability or if no accrual would be necessary in the following circumstances. Erismus is defending against a lawsuit. Erismus's management believes the company has a slightly worse than 50/50 chance of eventually prevailing in court, and that if it loses, the judgment will be $1,430,000. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in court. If it loses, management believes that damages could fall anywhere in the range of $2,830,000 to $5,660,000, with any damage in that range equally likely. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in court.…
After the end of the reporting period, prior to authorizing for issue the financial statementsof Chubby the Piggy Ltd for the year ended 31 March 20X7 the following issues were raised:1. The notification of the bankruptcy of a customer: The balance of trade receivablesdue from the customer at 31 March 20X7 was $23,000 and at the date of thenotification it was $25,000. No payment is expected from the bankruptcyproceedings.2. Sales of some items of product ChoCoCo were made at a price of $5,40 each in Apriland May 20X7. Sales staff receives a commission of 15% of the sales price on theseproducts. At 31 March 20X7 the company had 12,000 units of this product ininventory included at cost of $6 each.3. The company is being sued by an employee who lost a limb in an accident while atwork on March 15 20X7. The company is contesting the claim as the employee wasnot following the safety procedures that he had been instructed to follow.Accordingly the financial statements include a note of a…