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Exam 13: Accounting for Legal Reorganizations and Liquidations

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Question 21

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Total unsecured liabilities are calculated to be what amount?

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Question 22

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What are free assets?

A) assets for which net realizable value is greater than historical cost.
B) assets for which no market exists.
C) assets for which replacement cost is greater than historical cost.
D) assets available to be distributed for liabilities with priority and other unsecured obligations.
E) assets available to be distributed to stockholders.

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

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Question 23

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REFERENCE: Ref.13_04 A company that was to be liquidated had the following liabilities: Delete the first 7 lines - revised as the table below The company had the following assets:: -Total free assets available for all unsecured liabilities are calculated to be what amount?

REFERENCE: Ref.13_07 Mount Inc.was a hardware store that operated in Boise,Idaho.Management made some poor inventory acquisitions that loaded the store with unsalable merchandise.Due to the decline in revenues,the company became insolvent.Following is a trial balance as of March 15,2009,the day the company filed for a Chapter 7 liquidation. Company officials believed that sixty percent of the accounts receivable could be collected if the company was liquidated.The building and land had a fair value of $97,500,while the equipment was worth $24,700.The investments represented shares of a nationally traded company that could be sold at the time for $27,300.The entire inventory could be sold for only $42,900.Administrative expenses necessary to carry out a liquidation would have approximated $20,800. -Assume that the company was being liquidated and that the following transactions occurred: Accounts receivable of $23,400 were collected. All of the company's inventory was sold for $52,000. Additional accounts payable of $13,000 incurred for various expenses such as utilities and maintenance were discovered. The land and building were sold for $92,300. The note payable due to the Idaho Savings and Loan was paid. The equipment was sold at auction for only $14,300 with the proceeds applied to the note owed to the Second National Bank. The investments were sold for $27,300. Administrative expenses totaled $26,000 as of July 26,2009,but no payment had yet been made. Required: Prepare a statement of realization and liquidation for the period from March 15 through July 26,2009 .

On a statement of financial affairs,a specific liability may be classified as

What are the four categories of debts in a Statement of Financial Affairs?

What are the three categories of assets in a Statement of Financial Affairs?

REFERENCE: Ref.13_03 A company that was to be liquidated had the following liabilities: -Free assets after payment of liabilities with priority are calculated to be what amount?

REFERENCE: Ref.13_03 A company that was to be liquidated had the following liabilities: -Total free assets,before deducting liabilities with priority,are calculated to be what amount?

REFERENCE: Ref.13_03 A company that was to be liquidated had the following liabilities: -Total liabilities with priority are calculated to be what amount?

REFERENCE: Ref.13_08 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. -Compute the amount of unsecured liabilities without priority.

Which one of the following is a requirement that must be met before an involuntary bankruptcy petition can be filed?

Total payment on partially secured debt is calculated to be what amount?

How should the fresh start reorganization value normally be determined?

How is the presentation of a balance sheet during a reorganization different from a normal balance sheet??

On its balance sheet,a company undergoing reorganization should

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

How much will be paid to the holder of the note payable secured by the land and building? (Round your payout percentage to the nearest whole number. )

REFERENCE: Ref.13_07 Mount Inc.was a hardware store that operated in Boise,Idaho.Management made some poor inventory acquisitions that loaded the store with unsalable merchandise.Due to the decline in revenues,the company became insolvent.Following is a trial balance as of March 15,2009,the day the company filed for a Chapter 7 liquidation. Company officials believed that sixty percent of the accounts receivable could be collected if the company was liquidated.The building and land had a fair value of $97,500,while the equipment was worth $24,700.The investments represented shares of a nationally traded company that could be sold at the time for $27,300.The entire inventory could be sold for only $42,900.Administrative expenses necessary to carry out a liquidation would have approximated $20,800. -How much cash would have been paid to an unsecured,nonpriority creditor who was owed a total of $1,300 by Mount Inc.? (Round the payout percentage to a whole number. )

REFERENCE: Ref.13_02 Mandich 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: John Webb was owed $10,600,Samantha Jones was owed $15,000,Sandra Johnson was owed $11,900,and Dennis Roberts was owed $2,500.The maximum owed for any one employee's claims for contributions to benefit plans was $800.Estimated expense for administering the liquidation amounted to $40,000. -What information is conveyed by the Statement of Realization and Liquidation?