Deck 13: Accounting for Legal Reorganizations and Liquidations

Question 1

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

A) The present value of future cash flows.
B) Net realizable value.
C) The amount required for settlement.
D) Replacement cost.
E) The amount expected to be paid if the company could honor its debts.

Answer 1

C

Question 2

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

A) On the statement of retained earnings.
B) On the income statement, combined with the gains and losses from operations.
C) On the statement of stockholders' equity.
D) On the income statement, separate from other gains and losses.
E) On the statement of cash flows.

Answer 2

D

Question 3

Alpha Corp., about to be liquidated, has the following amounts for its assets and liabilities: The mortgage is secured by the land and building, and the note payable is secured by the equipment. Alpha expects that the expenses of administering the liquidation will total $45,000.How much should the mortgage holder expect to collect from the liquidation?

A) $570,000
B) $600,000
C) $550,000
D) $640,000
E) $478,000

Answer 3

A

Question 4

The statement of financial affairs should be prepared:

A) Under the going concern assumption.
B) Under the concept of conservatism.
C) Under the assumption that liquidation will occur.
D) Under the continuity concept.
E) Only for a company in Chapter 7 bankruptcy.

Question 5

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 for other unsecured obligations.
E) Assets available to be distributed to stockholders.

Question 6

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:

A) $130,000.
B) $63,000.
C) $147,500.
D) $180,000.
E) $45,500.

Question 7

Which of the following is not one of the more common reorganization plan elements?

A) Plans for plant expansion.
B) Plans for generating additional monetary resources.
C) Plans to settle the debts of the company that existed when the order for relief was entered.
D) Plans proposing changes in the company's operations.
E) Plans for changes in the management of the company.

Question 8

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

A) An expense.
B) An intangible asset, Reorganization Cost, which would normally be amortized over a five-year period.
C) Additional paid-in capital.
D) Retained earnings.
E) A prepaid asset until the entity emerges from reorganization.

Question 9

On its balance sheet, a company undergoing reorganization should:

A) Report its assets at fair value, so that financial statement users can estimate whether creditors' claims will be met.
B) Report its assets at net realizable value because there is reason to doubt that the organization is a going concern.
C) Report its assets as pledged or free.
D) Report its assets at current replacement cost.
E) Continue to report its assets at book value.

Question 10

Alpha Corp., about to be liquidated, has the following amounts for its assets and liabilities: The mortgage is secured by the land and building, and the note payable is secured by the equipment. Alpha expects that the expenses of administering the liquidation will total $45,000.How much should Alpha expect to pay on the accounts payable?

A) $200,000.
B) $100,000.
C) $145,000.
D) $80,000.
E) $95,000.

Question 11

Which one of the following is a requirement that must be met before an involuntary bankruptcy petition can be filed when there are at least 12 unsecured creditors?

A) The petition must be filed by all creditor(s) to whom the debtor owes at least $16,750.
B) The petition must be signed by creditor(s) with unsecured debts of at least $5,000.
C) The petition must be signed by a majority of the creditor(s).
D) The petition must be signed by creditor(s) to whom the debtor owes more than half of its debts.
E) The petition must be signed by at least three creditors with unsecured debts of at least $16,750.

Question 12

During a reorganization, cash reserves tend to grow. How should interest earned on these reserves be reported on the financial statements?

A) As deferred revenue until the reorganization is complete.
B) As a credit directly to retained earnings.
C) On the balance sheet as a long-term liability.
D) On the income statement, but not classified as a reorganization item.
E) On the income statement as a reorganization item.

Question 13

Which one of the following unsecured liabilities has the highest priority when an insolvent company is about to be liquidated?

A) Federal income taxes payable.
B) Claims for expenses of administering the bankruptcy.
C) Loans made to the company by its stockholders.
D) Employees' claims for salaries.
E) Bank loans.

Question 14

In a statement of financial affairs, assets are classified:

A) According to whether they are pledged as collateral in favor of particular creditors.
B) As current or noncurrent.
C) As monetary or nonmonetary.
D) As operating or non-operating.
E) As direct or indirect.

Question 15

What is normally required before a reorganization plan can be implemented?

A) The plan must be presented by the company and confirmed by the court.
B) The plan must be voted on, and accepted separately by, each class of creditors and each class of stockholders, then confirmed by the court.
C) The plan must be presented by the company, approved by two-thirds of each class of creditors, and confirmed by the court.
D) The plan must be presented by the company, approved by three-fourths of each class of stockholders, and confirmed by the court.
E) The plan must be approved by two-thirds of each class of creditors, approved by more than 50% of each class of stockholders, and confirmed by the court.

Question 16

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

A) At the undiscounted sum of future cash payments.
B) At book value prior to the reorganization.
C) As partially secured liabilities.
D) At the present value of future cash payments.
E) As unsecured liabilities.

Question 17

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

A) Current or long-term.
B) Secured or unsecured.
C) Monetary or nonmonetary.
D) Direct or indirect.
E) Past due or not yet due.

Question 18

How should the fresh start reorganization value normally be determined?

A) As the sum of current replacement cost of the company's assets.
B) As the fair value of assets, debt, and equity, including assets that were not in the previous balance sheet.
C) As the sum of the historical book value of net assets, adjusted for assets not previously recorded.
D) As the net realizable value of identifiable assets, debt, and equity, only including assets that were in the previous balance sheet.
E) As adjusted current cash flows for the entity as it emerges from reorganization.

Question 19

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

A) Historical cost.
B) Net realizable value, if lower than historical cost.
C) Replacement cost.
D) Net realizable value, if higher than historical cost.
E) Net realizable value, whether higher or lower than historical cost.

Question 20

During a reorganization, how should interest expense be reported on the financial statements?

A) On the income statement, but not classified as a reorganization item.
B) On the income statement as a separate reorganization item.
C) On the balance sheet as a prepaid expense.
D) As a debit directly to retained earnings.
E) On the balance sheet as an intangible asset.

Question 21

Which of the following is not a responsibility of the bankruptcy trustee?

A) Recover all property belonging to the insolvent company.
B) Liquidate common stock of the company.
C) Preserve the estate from any further deterioration.
D) Make distributions to the proper claimants.
E) Void preferences made by the debtor within 90 days prior to the filing of the bankruptcy petition if the company was already insolvent.

Question 22

Which of the following conditions or events does not signal an entity's inability to pay its debts as they become due?

A) Recurring operating losses.
B) Drops in the closing stock prices on a recognized stock exchange.
C) Working capital deficiencies.
D) Loan defaults.
E) Negative cash flows from operating activities.

Question 23

What information is conveyed by the Statement of Realization and Liquidation?

A) Account balances reported by the company at the date of the filing of the bankruptcy petition.
B) Cash receipts generated by the sale of the debtor's property.
C) Write up of assets.
D) Recognition of recorded liabilities.
E) Assets and liabilities but not stockholders' equity.

Question 24

Lapin Corp. owned the following assets when it came out of a Chapter 11 bankruptcy: Lapin Corp. had a fresh start reorganization value of $1,200,000. What amount of goodwill should have been recognized in recording the reorganization?

A) $70,000.
B) $145,000.
C) $20,000.
D) $215,000.
E) $90,000.

Question 25

Total assets, available to pay liabilities with priority and unsecured creditors, are calculated to be what amount?

A) $100,000.
B) $320,000.
C) $365,000.
D) $335,000.
E) $305,000.

Question 26

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.On a statement of financial affairs, what amount would have been shown as assets available to pay liabilities with priority and unsecured creditors?

A) $100,000.
B) $460,000.
C) $655,000.
D) $910,000.
E) $590,000.

Question 27

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.

Question 28

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

A) $229,000.
B) $276,350.
C) $134,000.
D) $204,000.
E) $208,350.

Question 29

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

A) $23,000.
B) $48,000.
C) $72,350.
D) $91,000.
E) $97,350.

Question 30

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

A) Pledged assets with partially secured creditors.
B) Liabilities with priority.
C) Free assets.
D) Unsecured creditors.
E) Fully secured creditors.

Question 31

Assuming all of the following expenses have priority, in what order are they prioritized?

A) Administrative expenses, employee claims for wages, unpaid taxes, claims for the return of customer deposits.
B) Employee claims for wages, unpaid taxes, administrative expenses, claims for the return of customer deposits.
C) Unpaid taxes, administrative expenses, employee claims for wages, return of customer deposits.
D) Administrative expenses, employee claims for wages, claims for the return of customer deposits, unpaid taxes.
E) Unpaid taxes, return of customer deposits, employee claims for wages, administrative expenses.

Question 32

Which statement is false regarding a plan for reorganization?

A) The plan is the heart of every Chapter 7 bankruptcy.
B) The provisions of the plan specify the treatment of all creditors and equity holders upon approval by the Court.
C) The plan shapes the financial structure of the entity that emerges.
D) The plan may contain numerous provisions as solutions to financial difficulties.
E) The plan may contain provisions for changes in the management of the company.

Question 33

What is an order for relief?

A) A court order that halts all actions against a debtor.
B) A court order that denies an involuntary bankruptcy petition.
C) A court order that dismisses all debt of the debtor.
D) A court order that requires full payment of all debt by the debtor.
E) A court order that appoints a bankruptcy trustee.

Question 34

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

A) The plan must be voted on by the creditors and the stockholders of the company.
B) A separate vote is required of each class of stockholders.
C) Any class of creditors that is not damaged by a reorganization is assumed to have accepted the plan without voting.
D) Even if creditors and stockholders approve of the plan, the court can reject the plan.
E) Acceptance of the plan requires the approval of two-thirds in number of claims and one-half in dollar amount of creditors that cast votes.

Question 35

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

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 36

Total liabilities with priority are calculated to be what amount?

A) $38,000.
B) $58,650.
C) $63,000.
D) $106,650.
E) $111,000.

Question 37

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 amount would the company have expected to pay for every dollar of unsecured liability without priority?

A) $0.40.
B) $0.59.
C) $0.50.
D) $0.65.
E) $0.72.

Question 38

"Stockholders" equity would be included in which section of a Statement of Financial Affairs?

A) Pledged assets with partially secured creditors.
B) Liabilities with priority.
C) Free assets.
D) Unsecured creditors.
E) Fully secured creditors.

Question 39

A company is insolvent when:

A) It is unable to pay debts as the obligations come due.
B) It is more likely than not that it will not be able to pay debts within a reasonable period of time following the date such obligations become due.
C) It is unable to timely remit payment on more than two-thirds of its outstanding obligations measured on a rolling three-month basis.
D) It is unable to pay debts within 90 days following the close of the company's reporting year, whether such year is a calendar or fiscal year.
E) It is in default on one-third or more of its outstanding debt obligations.

Question 40

All of the following items are liabilities with priority except:

A) Obligations arising between the date an order of relief is issued and the date of final realization of assets.
B) Employee claims for contributions to benefit plans earned during the 180 days preceding the filing of a petition, limited to $13,650 per individual.
C) Government claims for unpaid taxes.
D) Claims for the return of deposits made by customers to acquire property or services, which were never delivered or provided by the debtor, limited to $3,025.
E) Claims for administrative expenses in preserving and liquidating the company.

Question 41

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 unsecured liabilities.

Question 42

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 liabilities with priority.

Question 43

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 total liabilities with priority.

Question 44

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.)

Question 45

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 assets that are available for unsecured creditors after payment of liabilities with priority.

Question 46

A statement of financial affairs created for an insolvent corporation that was beginning the liquidation process disclosed the following data (assets were shown at net realizable values): Required:Prepare a schedule to show the amount available for unsecured creditors after payment of liabilities with priority.

Question 47

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.

Question 48

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 assets available for unsecured creditors after payment of liabilities with priority.

Question 49

Cash would be included in which section of a Statement of Financial Affairs?

A) Pledged assets with partially secured creditors.
B) Liabilities with priority.
C) Free assets.
D) Unsecured creditors.
E) Fully secured creditors.

Question 50

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 payment on partially secured debt.

Question 51

Land with a net realizable value of $150,000 is used as collateral against an $85,000 notes payable. In which section of a Statement of Financial Affairs would the land appear?

A) Pledged assets with partially secured creditors.
B) Liabilities with priority.
C) Free assets.
D) Unsecured creditors.
E) Pledged assets with fully secured creditors.
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
44) 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 assets available to pay liabilities with priority and unsecured creditors.

Question 52

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, 2021, the day the company filed for 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 publicly 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 were estimated to be $20,800.How much cash would have been paid to an unsecured non-priority creditor who was owed a total of $1,300 by Mount Inc.? (Round the payout percentage to a whole number.)

Question 53

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.

Question 54

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.

Question 55

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, 2021, the day the company filed for 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 publicly 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 were estimated to be $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, for utilities and maintenance that were subsequently 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, 2021, but no payment had yet been made.Required:Prepare a statement of realization and liquidation for the period from March 15 through July 26, 2021.

Question 56

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 assets available for unsecured creditors after payment of liabilities with priority.

Question 57

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 payment on the bond.

Question 58

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 total assets available to pay liabilities with priority and unsecured creditors.

Question 59

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 unsecured non-priority liabilities.

Question 60

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, 2021, the day the company filed for 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 publicly 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 were estimated to be $20,800.Required:Prepare a statement of financial affairs for Mount Inc. as of March 15, 2021.

Question 61

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.How much will Hampton's creditor of an unsecured accounts payable of $4,000 receive? (Round your payout percentage to the nearest whole number.)

Question 62

What is the purpose of Chapter 7 of the Bankruptcy Reform Act?

Question 63

Candice Company is currently going through bankruptcy reorganization. The accountant has determined the following balances of the accounts at December 31, 2021. Prepare the balance sheet for Candice Company. Retained earnings will need to be calculated.

Question 64

To what does the term Chapter 7 bankruptcy refer?

Question 65

What occurs in the accounting records for fresh start accounting when a bank agrees to accept less than the debtor's book value of a note payable?

Question 66

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.

Question 67

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

Question 68

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.

Question 69

What is an order for relief?

Question 70

What is the meaning of the phrase debtor in possession?

Question 71

Prepare a Statement of Financial Affairs.

Question 72

What is meant by a "partially secured liability"?

Question 73

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?

Question 74

What is meant by a "fully secured liability"?

Question 75

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

Question 76

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.What is the payout percentage to unsecured creditors? (Round the percentage to a whole number and two decimal places.)

Question 77

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.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.)

Question 78

Berry Company is going through Chapter 11 bankruptcy reorganization. Prepare the income statement for the calendar year 2021 using the following information. The effective tax rate is 20%.

Question 79

What is the difference between a liquidation and a reorganization?

Question 80

What term is used for a bankruptcy forced upon a debtor by its creditors?