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Exam 13: Accounting for Legal Reorganizations and Liquidations

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Question 41

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What is an order for relief?

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An order for relief is a court...

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Question 42

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Palmer Co. had the following amounts for its assets, liabilities, and stockholders' equity accounts just before filing a bankruptcy petition and requesting liquidation: Of the salaries payable, $35,000 was owed to an officer of the company. The remaining amount was owed to salaried employees who had not been paid within the previous 80 days: Barbara Jones was owed $11,200, Denise Graham was owed $18,700, John Sanders was owed $12,100, and Robert Walters was owed $3,000. The maximum owed for any one employee's claims for contributions to benefit plans was $800. Estimated expense for administering the liquidation amounted to $45,000.What was the total amount of unsecured liabilities with priority?

A) $120,000.
B) $245,000.
C) $181,950.
D) $184,300.
E) $222,000.

F) D) and E)
G) None of the above

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Question 43

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Payroll taxes payable would be included in which section of a Statement of Financial Affairs?

What are possible plans that management of a troubled business might create to mitigate substantial doubt that the entity will fail to make its debt payments within one year from the issuance of financial statements?

Which statement is false regarding the acceptance and confirmation of a reorganization plan?

Lawyer's fees incurred during a reorganization are accounted for as:

Assets available for unsecured creditors after payments of liabilities with priority are calculated to be what amount?

How should liabilities (except for deferred income taxes) be reported by a company using fresh start accounting?

Hampton Company is trying to decide whether to seek liquidation or reorganization. Hampton has provided the following balance sheet: Additional information is as follows:The investments are currently worth $13,000.It is estimated that $32,000 of the accounts receivable are collectible.The inventory can be sold for $74,000.The prepaid expenses and the intangible assets have no net realizable value.The land and building are currently valued at $250,000.The equipment can be sold for $60,000.Administrative expenses (not yet recorded) are estimated to be $12,500.Accrued expenses include $17,000 of salaries payable ($11,000 to one employee and $3,000 each to two other employees).Accrued expenses include $7,000 of unpaid payroll taxes.Prepare a schedule to show the amount of assets available for unsecured creditors after payment of liabilities with priority.

In a statement of financial affairs, assets are classified:

Where should a company undergoing reorganization report the gains and losses resulting from the reorganization?

Lucky Co. had cash of $65,000, inventory worth $117,000, and a building worth $169,000. The company's debts consisted of accounts payable of $234,000, a note payable of $104,000 (secured by the inventory), liabilities with priority of $26,000, and a bond payable of $195,000 (secured by the building).Prepare a schedule to show the amount of total assets available to pay liabilities with priority and unsecured creditors.

On a statement of financial affairs, a company's assets should be valued at:

A company that was to be liquidated had the following liabilities: The company had the following assets: Prepare a schedule to show the amount of total payment on notes payable. (Round the payout percentage to one decimal place, for example, 0.1234 as 12.3 percent.)

Oakwood Co. filed a bankruptcy petition and liquidated its noncash assets. Oakwood was paying thirty-five cents on the dollar for unsecured claims. Jordan Co. held a mortgage of $180,000 on Oakwood's land which was sold for $130,000. The total amount of payment that Jordan should have received is calculated to be:

How are assets and liabilities valued on a Statement of Financial Affairs?

Hampton Company is trying to decide whether to seek liquidation or reorganization. Hampton has provided the following balance sheet: Additional information is as follows:The investments are currently worth $13,000.It is estimated that $32,000 of the accounts receivable are collectible.The inventory can be sold for $74,000.The prepaid expenses and the intangible assets have no net realizable value.The land and building are currently valued at $250,000.The equipment can be sold for $60,000.Administrative expenses (not yet recorded) are estimated to be $12,500.Accrued expenses include $17,000 of salaries payable ($11,000 to one employee and $3,000 each to two other employees).Accrued expenses include $7,000 of unpaid payroll taxes.Prepare a schedule to show the amount of unsecured liabilities without priority.

Bazley Co. had severe financial difficulties and was considering the possibility of filing a bankruptcy petition. At that time, the company had the following assets (stated at net realizable value) and liabilities. Prepare a schedule to show the amount of total assets available to pay liabilities with priority and unsecured creditors.

Total unsecured non-priority liabilities are calculated to be what amount?

Bazley Co. had severe financial difficulties and was considering the possibility of filing a bankruptcy petition. At that time, the company had the following assets (stated at net realizable value) and liabilities. Prepare a schedule to show the amount of total unsecured liabilities.