Question
Becket Corporation's accountant has prepared the following balance sheet as of November 10, 2017, the date on which the company is to release a plan
Becket Corporation's accountant has prepared the following balance sheet as of November 10, 2017, the date on which the company is to release a plan for reorganizing operations under Chapter 11 of the Bankruptcy Reform Act:
BECKET CORPORATION Balance Sheet November 10, 2017 | |||
Assets | |||
Cash | $ | 15,000 | |
Accounts receivable (net) | 64,000 | ||
Investments | 29,000 | ||
Inventory (net realizable value is expected to approximate 75% of cost) | 83,000 | ||
Land | 60,000 | ||
Buildings (net) | 251,000 | ||
Equipment (net) | 123,000 | ||
Total assets | $ | 625,000 | |
Liabilities and Equities | |||
Accounts payable | $ | 132,000 | |
Notes payablecurrent (secured by equipment) | 223,000 | ||
Notes payable(due in 2020)(secured by land and buildings) | 328,000 | ||
Common stock ($12 par value) | 60,000 | ||
Retained earnings (deficit) | (118,000 | ) | |
Total liabilities and equities | $ | 625,000 | |
The company has presented the following proposal:
The reorganization value of the company's assets just prior to issuing additional shares below, selling the company's investment, and conveying title to the land is set at $665,000 based on discounted future cash flows.
Accounts receivable of $23,000 are written off as uncollectible. Investments are worth $46,000, land is worth $86,000, the buildings are worth $306,000, and the equipment is worth $89,000.
An outside investor has been found to buy 6,000 shares of common stock at $13 per share.
The company's investments are to be sold for $46,000 in cash with the proceeds going to the holders of the current note payable. The remainder of these short-term notes will be converted into $133,000 of notes due in 2021 and paying 8 percent annual cash interest.
All accounts payable will be exchanged for $43,000 in notes payable due in 2018 that pay 6 percent annual interest.
Title to land costing $23,000 but worth $53,000 will be transferred to the holders of the note payable due in 2020. In addition, these creditors will receive $180,000 in notes payable (paying 8 percent annual interest) coming due in 2024. These creditors also are issued 1,000 shares of previously unissued common stock. Becket retains the remainder of its land.
Investments | 17,000 | |
Land | 26,000 | |
Buildings | 55,000 | |
Goodwill | 19,750 | |
Accounts Receviable | 23,000 | |
Inventory | 20,750 | |
Equipment | 34,000 | |
Additional paid-in capital | 40,000 | |
Cash | 78,000 | |
Common Stock | 72,000 | |
Additional paid-in capital | 6,000 | |
| ||
Cash | 46,000 | |
Investments | 46,000 | |
Notes payable-current | 223,000 | |
Cash | 46,000 | |
Notes payable (due in 2021) | 133,000 | |
Gain on discharge of debt | 44,000 | |
Accounts Payable | 132,000 | |
Notes Payable (due in 2018) | 43,000 | |
Gain on discharge of debt | 89,000 | |
Notes Payable | 328,000 | |
Land | 53,000 | |
Notes Payable (due in 2024) | 180,000 | |
Common Stock | 12,000 | |
Additional Paid in Capital | ?????? | |
Gain on discharge of debt | ?????? | |
Gain on discharge of debt | ?????? | |
Additional paid-in capital | ????? | |
Retained Earnings | ????? |
NOTE: I ONLY NEED HELP WITH THE JOURNAL ENTRIES THAT HAVE QUESTION MARKS INTHE BOX!
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