(22–2)

Reorganization The Verbrugge Publishing Company’s 2010 balance sheet and income statement are as follows (in millions of dollars):

892 Part 9: Special Topics Balance Sheet Current assets $168 Current liabilities $ 42 Net fixed assets 153 Advance payments 78 Goodwill 15 Reserves 6

$6 preferred stock, $112.50 par value (1,200,000 shares) 135

$10.50 preferred stock, no par, callable at $150 (60,000 shares) 9 Common stock, $1.50 par value (6,000,000 shares) 9 Retained earnings 57 Total assets $336 Total claims $336 Income Statement Net sales $540.0 Operating expense 516.0 Net operating income $ 24.0 Other income 3.0 EBT $ 27.0 Taxes (50%) 13.5 Net income $ 13.5 Dividends on $6 preferred 7.2 Dividends on $10.50 preferred 0.6 Income available to common stockholders $ 5.7 Verbrugge and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $6 preferred will be exchanged for one share of

$2.40 preferred with a par value of $37.50 plus one 8% subordinated income debenture with a par value of $75. The $10.50 preferred issue will be retired with cash.