Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Question
Chapter 13, Problem 43P
a.
To determine
Explain how Company S’s accountant knows that fresh start accounting must be utilized.
b.
To determine
Prepare a
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The 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.
The 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.
Smith Corporation has gone through bankruptcy and is ready to emerge as a reorganized entity on December 31, 2017. On this date, the company has the following assets (fair value is based on discounting the anticipated future cash flows):
Book value
Fair value
Accounts Receivable
$20000
$18000
Inventory
143000
111000
Land and buildings
250000
278000
Machinery
144000
121000
Patents
100000
125000
The company has a reorganization value of $800,000.Smith has 50,000 shares of $10 par value common stock outstanding. A deficit retained earnings balance of $670,000 also is reported. The owners will distribute 30,000 shares of this stock as part of the reorganization plan.The company’s liabilities will be settled as follows:∙ Accounts payable of $180,000 (existing at the date on which the order for relief was granted) will be settled with an 8 percent, two-year note for $35,000.∙ Accounts payable of $97,000 (incurred since the date on which the order for relief was granted)…
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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