Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 13, Problem 21P
The New England Company has a debt to a bank of $55,000. The company is currently being liquidated and believes that between $12,000 and $20,000 will be paid on that debt. According to the liquidation basis of accounting, what amount is reported for this liability?
- a. $12,000
- b. $16,000
- c. $20,000
- d. $55,000
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A statement of financial affairs created for an insolvent corporation that is beginning the process of liquidation discloses the following data (assets are shown at net realizable values):a. This company owes $13,000 to an unsecured creditor (without priority). How much money can this creditor expect to collect?
b. This company owes $120,000 to a bank on a note payable that is secured by a security interest attached to property with an estimated net realizable value of $90,000. How much money can this bank expect to collect?
The following information are related to JVCD Corporation which is undergoing liquidation:
a. A bank loan amounting to P455,000 is secured by inventories with book value of P525,000 and net realizable value of P350,000.
b. Of the P1,120,000 accounts payable, P343,000 is secured by accounts receivable amounting to P413,000 which is 10% uncollectible.
c. Property and equipment costing P875,000 and which is depreciated by 20% has a net realizable value of P588,000.
d. Other unrecorded liabilities are accrued interest payable on bank loan, P45,500; salaries payable, P112,000; taxes payable, P63,000 and trustee’s fee, P52,500.
e. Cash available before liquidation amounts to P87,500.
Compute for the estimated deficiency to unsecured creditors.
A. 450,800
B. 882,000
C. 927,500
D. 980,000
13. In 2023, a corporation sells its business in an arm's length transaction for proceeds
equal to FMV. At the time of the sale the business has accounts receivable of
$123,000. The corporate vendor of the business and the purchaser agree that the
realizable value of the receivables is $118,500. In 2022, the vendor had deducted a
reserve for doubtful debts of $6,800. Which of the following statements is correct?
A. If no joint election is filed under ITA 22, the vendor will have an addition
to business income of $2,300.
B. If no joint election is filed under ITA 22, the vendor will have an addition
to business income of $6,800 and an allowable capital loss of $2,250.
C. If a joint election is filed under ITA 22, the vendor will have a business
deduction of $2,300.
D. If a joint election is filed under ITA 22, the vendor will have a business
deduction of $4,500.
14. During the current year, Denos Corporation incurred costs of $45,000 for leasehold
improvements to its newly rented…
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The following information is related to STANK Corporation which isundergoing liquidation:a. A bank loan amounting to P455,000 is secured by inventories with a book value of P525,000 and a net realizable value of P350,000. b. Of the P1,120,000 accounts payable, P343,000 is secured by accounts receivable amounting to P413,000 which is 10% uncollectible. c. Property and equipment costing P875,000 and which is depreciated by 20% has a net realizable value of P588,000. d. Other unrecorded liabilities are accrued interest payable on a bank loan, P45,500; salaries payable, P112,000; taxes payable, P63,000, and trustee’s fee, P52,500. e. Cash available before liquidation amounts to P87,500. Compute for the estimated deficiency to unsecured creditors.A. 450,800 C. 927,500B. 882,000 D. 980,000arrow_forward53. CPA Company used the allowance method of accounting for uncollectible accounts. During 2021, the entity had charged 750,000 to bad debt expense and wrote off accounts receivable of 780,000 as uncollectible. What was the decrease in working capital?arrow_forward2.) Sisy Company has an outstanding 950,000 note payable to Bro Finance Corporation. Because of financial difficulties, Sisy negotiates with Bro to exchange inventory of machine parts to satisfy the debt. The cost of the machine parts inventory transferred is carried at sisy's books at P 610,000. The estimated sales price of these inventory items is p 835,000. REQUIRED: a.) How much shall be recognize as gain on debt restructuring?arrow_forward
- 12. Seco Corp. was forced into bankruptcy and is in the process of liquidating assets and paying claims. Unsecured claims will be paid at the rate of forty cents on the dollar. Hale holds a $30,000 noninterest- bearing note receivable from Seco collateralized by an asset with a book value of $35,000 and a liquidation value of $5,000. The amount to be realized by Hale on this note is a. $5,000 b. $12,000 c. $15,000 d. $17,000arrow_forwardAtaway Company has suffered severe financial difficulties and is considering filing a bankruptcy petition. It has the following assets and liabilities. The assets are stated at net realizable value. Assets (pledged against debts of $78,000) Assets (pledged against debts of $146,000) Other assets Liabilities with priority Other unsecured creditors $ 132,000 58,000 88,000 53,200 208,000 In a liquidation, how much money would be paid on the partially secured debt? Payment on partially secured debt $ 82,667arrow_forwardA company that was to be liquidated had the following liabilities: Income taxes $ 10,400 Notes payable (secured by land) Accounts payable 156,000 $107,900 Salaries payable to employees ($16,000 for John Jay and $2,800 for Ann Still) Bonds payable Administrative expenses for liquidation 18,800 81,000 26,000 The company had the following assets: Вook Fair Value Value $104,000 $ 42,900 130,000 Current assets Land 117,000 Buildings & equipment 130,000 143,000 Prepare a schedule to show the amount of total assets available to pay liabilities with priority and unsecured creditors. Short Answer Toolbar navigation BI U S : : > !!!arrow_forward
- The following items were displayed in the statement of affairs of a Corporation: Unsecured liabilities without priority P100,000 Stockholder's equity 40,000 Loss on realization of assets 30,000 Estimated taxes and administrative costs that have not been entered in the records 10,000 Unsecured creditors with priority 15.000 Based on the foregoing information, how much should the unsecured creditors without priority expect to receive on the liquidation?arrow_forward18. The statement of affairs of Darrell Putix Co. indicates that unsecured creditors without priority with total claims of P720,000 may expect to recover only P288,000 after all the assets are sold. Among the creditors of Darrell Putix Co. are the following: • Government – taxes payable of P400,000, inclusive of P80,000 assessments and surcharges. • XYZ bank – loan payable of P4,000,000 and accrued interest of P200,000, backed by collateral security with realizable value of P4,800,000. • Alpha Financing Co. – loan payable of P3,200,000 backed by collateral security with realizable value of P2,000,000. • Mr. Bombay – loan payable of P1,000,000 and accrued interest of P200,000. No collateral security. How much is the expected recovery of Mr. Bombay? a. 780,000 b. 480,000 c. 288,000 d. 0arrow_forwardLolo Co. owes $150,000 in notes payable plus $12,000 of accrued interest to, the company is having financial difficulty. Prepare the journal entry on Lolo Co. 's books to record the settlement of this debt under the following independent cases: a) To eliminate the debt, the creditor agrees to accept from Lolo Co. land having a fair value of $140,000 and a recorded cost of $145,000. b) To eliminate the debt, the creditor agrees to take an equity interest in Lolo Co. Lolo Co issued 10,000 ordinary shares having a fair value of $14 per share and $5 par value per share. c) To eliminate the debt, the creditor agrees to restructure the debt by issuing a new zero interest bearing note with $170,000 face value for 3 years. The market interest rate of similar notes is 9%.arrow_forward
- PAYLESS Corporation filed a petition of bankruptcy on January 2011. On March 15, 2011 the trustee provided the following information about the corporation's financial affairs. Book values Estimated Realizable Values Assets P 200, 000 P 200, 000 750, 000 750, 000 2, 800, 000 Cash Accounts receivable, net Inventories 1, 000, 000 1, 500, 000 2, 500, 000 P 5.200.000 Plant assets – net Total Liabilities P 500, 000 1, 500, 000 1, 000, 000 2, 200, 000 P 5. 200, 00Q 4. Determine the amount expected to be available for unsecured claims. Liability for priority claims Accounts payable – unsecured Note payable, secured by accounts receivable Mortgage payable, secured by all plant assets Total A. P1, 500, 000 В. Р900, 000 C. P800, 000 D. P1, 050, 000arrow_forwardA Corporation was forced into bankruptcy and is in the process of liquidatingassets and paying claims. The recovery percentage is estimated to be at 20%.The Corporation holds a notes receivable from a customer amounting to P100,000 collateralized by an asset with a book value of P60,000 and a liquidation value of P50,000. The amount to be realized by on this note is:arrow_forwardMiner Company is being forced into bankruptcy. The Company's creditors and stockholders have requested an estimate of the results of liquidation of the Company. Miner's trial balance follows: Credit Accounts Cash Accounts receivable Allowance for bad debts Notes receivable Accrued interest on notes receivable Inventory Buildings Accumulated depreciation-Buildings Equipment Accumulated depreciation-Equipment Prepaid insurance Goodwill Accrued wages Taxes payable Accounts payable and other liabilities Notes payable Accrued interest payable Common stock Retained earnings (deficit) Total Debit P6,000 63,000 P2,000 50,000 1,200 60,000 182,000 63,000 14,600 1,400 1,100 8,500 6,000 2,400 170,000 80,000 1,600 110,000 50,000 P436,400 P436,400 The assets are expected to bring cash on conversion in the following amounts Accounts receivable Notes receivable including P1,000 accrued interest Building Prepaid insurance P50,000 40,800 75,000 400 The inventory can be sold for P30,000 and is expected…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
How Bankruptcy Works; Author: Two Cents;https://www.youtube.com/watch?v=tpI0XWjIsqI;License: Standard Youtube License