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 38P
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Casper Blueprinting, Inc., has filed under Chapter 7 of the Bankruptcy Code. The estimated net realizable value of its assets is as follows:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,000Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,000Inventory and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000Blueprinting equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000Deliver vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000Total. . . . . . . . . . . . . . . . .…
A company going through a Chapter 7 bankruptcy has the following account balances:
Cash . . . . . . . . . . . . . . . . . . $ 30,000 Receivables (30% collectible) . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 50,000Inventory (worth $39,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 90,000Land (worth $120,000) (secures note payable) . . . . . . . . . . . . . . . 100,000Buildings (worth $180,000) (secures bonds payable) . . . . . . . . . . 200,000. Salaries payable (Four workers owed equal amounts for last two weeks) . . . 10,000Accounts payable . . . . . . . . . .90,000Note payable (secured by land) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000Bonds payable (secured by building) . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 100,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .…
Ataway Company has severe financial difficulties and is considering filing a bankruptcy petition. At this time, it has the following assets and liabilities. The assets are stated at net realizable value.
Assets (pledged against debts of $70,000) . . . . . . . . . . . . . . . . $116,000Assets (pledged against debts of $130,000) . . . . . . . . . . . . . . . . . 50,000Other assets . . . . . . . . . . . . . . . 80,000Liabilities with priority . . . . . . . 42,000Other unsecured creditors . . . 200,000
In a liquidation, how much money would be paid on the partially secured debt?
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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- 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):Assets pledged with fully secured creditors . . . . . . . . . . . . . . . . $220,000Fully secured liabilities .. . . . 160,000Assets pledged with partially secured creditors . . . . . . . . . . . . . . . 390,000Partially secured liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510,000Assets not pledged . . . . . . 310,000Unsecured liabilities with priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,800Accounts payable (unsecured) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000a. 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…arrow_forwardAfrica Company recently filed for bankruptcy. Immediately before liquidation. Africa Co. had the following statement of financial position Cash Investments at FVPL Accounts receivable Inventory Total P50,000 Accounts payable P650,000 150,000 Contributed capital 500,000 300,000 Retained eamings (150,000) 500,000 P1,000,000 Total P1,000,000 Africa had the following transactions in relation to its liquidation process • Sale of inventory amounted to P300,000. P50.000 was on account with the remainder on cash basis. The cost of merchandise sold amounted to P315,000. • Collections of receivables. P115.000. Purchase of additional inventory on account. P15,000. Paid suppliers, P350,000 Sold its investment at FVPL for P186500. including accrued interest of P1,500. Paid expenses of the trustee. P75.000. Unpaid expenses incurred amounted to P3500 Wrote-off P15.000 of its accounts receivables Required 1. How much is the net loss during the liquidation process?arrow_forwardThe Larisa Company is exiting bankruptcy reorganization with the following accounts: Book Value Fair Value $ 81,000 $ 92,000 Receivables Inventory Buildings 201,000 301,000 301, 000 331,000 22,000 (71, 000) 212,000 402,000 301,000 Liabilities Common stock Additional paid-in capital Retained earnings (deficit) The company's assets have a $761,000 reorganization value. As part of the reorganization, the company's owners transferred 70 percent of the outstanding stock to the creditors. Prepare the journal entry (or entries) necessary to adjust the company's records to fresh start accounting. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forward
- Panther Company is acquiring the net assets of Sharon Company. The book and fair values of Sharon’s accounts are as follows: Accounts Book FairCurrent Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000 $120,000Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 80,000Building and Equipment . . . . . . . . . . . . . . . . . . . . . . . 300,000 400,000Customer List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 20,000Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100,000 100,000What values will be assigned to current assets, land, building and equipment, the customer list, liabilities, goodwill, and gain under each of the following acquisition price scenarios?a. $800,000b. $450,000arrow_forwardThe Larisa Company is exiting bankruptcy reorganization with the following accounts: Book Value Fair Value Receivables $ 87,000 $ 104,000 Inventory 207,000 224,000 Buildings 307,000 414,000 Liabilities 307,000 307,000 Common stock 337,000 Additional paid-in capital 34,000 Retained earnings (deficit) (77,000 ) The company's assets have a $787,000 reorganization value. As part of the reorganization, the company's owners transferred 70 percent of the outstanding stock to the creditors. 1) Record the entry to adjust asset values to fair value. 2) Record the entry to reduce additional paid in capital balance to correct figure, to close out gain account, and to eliminate deficit.arrow_forwardThe Larisa Company is exiting bankruptcy reorganization with the following accounts: Book Value Fair Value Receivables $ 87,000 $ 104,000 Inventory 207,000 224,000 Buildings 307,000 414,000 Liabilities 307,000 307,000 Common stock 337,000 Additional paid-in capital 34,000 Retained earnings (deficit) (77,000 ) The company's assets have a $787,000 reorganization value. As part of the reorganization, the company's owners transferred 70 percent of the outstanding stock to the creditors. Record the entry to reduce additional paid in capital balance to correct figure, to close out gain account, and to eliminate deficit.arrow_forward
- WANTED Corporation filed bankruptcy on July 1, 2011 and some of the infomation below were taken from its statement of affairs. Estimated Realizable Value P300, 000 Book Value Assets: Assets pledge with fully secured creditors Assets pledge with partially secured creditors P250, 000 180, 000 120, 000 Liabilities: Fully secured creditors Partially secured creditors Unsecured creditors with priority P280, 000 200, 000 100, 000 Unsecured creditors 400, 000 6. Assumed that the assets are converted to cash at the estimated realizable values, what is the total estimated realizable value of the free assets if the partially secured creditors received P176, 000? A. P436, 000 в. Р316, 000 c. P336, 000 D. P416, 000arrow_forwardThe Larisa Company is exiting bankruptcy reorganization with the following accounts: Book Value Fair Value Receivables $ 87,000 $ 104,000 Inventory 207,000 224,000 Buildings 307,000 414,000 Liabilities 307,000 307,000 Common stock 337,000 Additional paid-in capital 34,000 Retained earnings (deficit) (77,000 ) The company's assets have a $787,000 reorganization value. As part of the reorganization, the company's owners transferred 70 percent of the outstanding stock to the creditors. Prepare the journal entry (or entries) necessary to adjust the company’s records to fresh start accounting. Record the entry to reduce additional paid in capital balance to correct figure, to close out gain account, and to eliminate deficit.arrow_forwardWhich company is most likely closest to filing for bankruptcy in the near term? A) Company A which shows $0 in profit B) Company B which shows $0 in cash C) Company C which shows $0 in inventoryarrow_forward
- The Larisa Company is exiting bankruptcy reorganization with the following account balances: Net Book Value Fair Value Receivables $ 100,000 $ 130,000 Inventory 220,000 250,000 Buildings 320,000 440,000 Liabilities 820,000 820,000 Common stock 150,000 Additional paid-in capital 60,000 Retained earnings (deficit) (390,000) Larisa Company’s assets have a $870,000 reorganization value. As part of the reorganization plan, the company’s owners transferred 80 percent of the outstanding stock to the creditors in exchange for a $500,000 reduction in the liabilities. Required: Prepare the journal entry (or entries) necessary to adjust the company’s records to fresh start accounting. Journal entry worksheet Note: Enter debits before credits. Transaction General Journal Debit Credit 1 these are the differnt lables please…arrow_forwardAlitech Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of Alitech at the time of filing are summarized as follows: Estimated Realizable Book Value ValueCash $ 10,000 $ 10,000Accounts receivable-net 60,000 50,000Inventory 110,000 65,000Land 20,000 35,000Building 200,000 126,000Goodwill…arrow_forwardAlitech Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of Alitech at the time of filing are summarized as follows: Estimated Realizable Book Value ValueCash $ 10,000 $ 10,000Accounts receivable-net 60,000 50,000Inventory 110,000 65,000Land 20,000 35,000Building 200,000 126,000Goodwill…arrow_forward
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