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6 On January 2, 20X2, Hobbes Company files a petition for relief under Chapter 11 of the Bankruptcy Code. Hobbes had disastrous operating performance during the recent recession and needs time to reestablish profitable operations. The trial balance on January 2. 20X2, follows: 5 points eBook Cash Accounts Receivable (net) Inventory Property, Plant, and Equipment Accumulated Depreciation Accounts Payable Notes Payable, 10% Bonds Payable, 12% Interest Payable Preferred Stock Common Stock, $1 par Additional Paid-In Capital Retained Earnings (deficit) Total Debit Credit $ 15,600 66,499 103,609 620,900 $140,zee 139,000 169,480 251,180 48,300 51,100 51,1ee 76,180 120,309 $926,800 $926,820 Print References The following information applies to the 20x2 fiscal year ending December 31, 20X2. Hobbes is in reorganization proceedings for the entire year, and the plan of reorganization has not been approved as of December 31, 20X2. The debtor retained possession of the company during the year. Income Data for 20x2: 1. Sales revenue of $246,800 is generated during the year. 2. Cost of goods sold is $169,400 as a result of cost reduction programs implemented during the year. 3. Selling, operating, and administrative expenses are $51.100 for the year. 4. Interest expense is $5,100. Contractual interest would have been $53,400 for the year. 5. Reorganization items include $16.800 in fees paid to professionals and $3.300 of interest earned on cash accumulated as a result of the Chapter 11 proceedings. 6. The income tax of $4,100 on operating income was paid during the year. 7. Discontinued operations included a $17.000 loss on operations, net of tax, and a $8,400 gain on the sale of assets, net of tax. The bankruptcy court administered the sale of the assets under the Chapter 11 proceedings. 6 5 points Cash Flow Data for 20x2: 1. A total of $256.300 is received from customers. This includes $19.500 received on the accounts receivable that were outstanding prior to filing the petition. 2. A total of $207.400 is paid to suppliers, employees, and others for operations. 3. The current interest expense of $5,100 on postpetition debt is paid during the year. 4. Professional fees of $16.800 are paid, and interest on cash accumulations of $3.300 is received. 5. Net cash used by discontinued operations, excluding the sale of assets, is $3,300. 6. The proceeds from the sale of the discontinued assets is $19,500. The bankruptcy court administered this sale. 7. Hobbes borrowed $11,700 in short-term debt as part of a financing plan administered by the court. 8. The court authorized a payment of $11.700 on the bonds payable. The ending cash balance of $72,100 represents an increase of $56,500 during the year. eBook Print References Other Data for 20X2: 1. Careful working capital management reduced the ending inventory to $88,800. Continued reduction is expected in 20x3. 2. The property, plant, and equipment, net of accumulated depreciation at the end of 20x2 totaled $461,600. 3. In addition to the $11,700 short-term borrowings that are part of the court-approved financing plan. Hobbes has postpetition accounts payable of $8.600. Required: a. Prepare the income statement for Hobbes for the year ending December 31, 20X2. (Negative amounts should be Indicated by a minus sign.) 6 Requlred: a. Prepare the income statement for Hobbes for the year ending December 31, 20X2. (Negative amounts should be Indicated by a minus slgn.) 5 points HOBBES COMPANY (Debtor-in-Possession) Income Statement For the Year December 31, 20X2 eBook Revenue Print Cost and Expenses: References Earnings before reorganization items and income taxes Reorganization items: Interest earned on accumulated cash resulting from chapter 11 proceeding Total reorganization items Income before income tax and discontinued operations Income tax Income before discontinued operations Discontinued op Net income (loss) from discontinued operations 6 b. Prepare the statement of cash flows for the company for the year ending December 31, 20X2. (Amounts to be deducted should be Indicated by minus slgn.) HOBBES COMPANY 5 points (Debtor-in-Possession) Statement of Cash Flows For the Year December 31, 20X2 Cash Flows from Operating Activities: eBook Print References Operating Cash Flows from Reorganization Activities: Interest received on cash accumulated because of chapter 11 proceeding Operating Cash Flows from Discontinued Operations: Cash Flows Provided by Investing Activities: Proceeds from sale of assets due to chapter 11 proceeding Net borrowings under short-term financing plan Principal payments on pre-petition debt authorized by court (bonds payable) Net cash provided by investing activities Cash at January 1, 20X2 Cash at December 31, 20X2 A 6 C.Prepare the balance sheet for the company as of December 31, 20X2. (Amounts to be deducted should be indicated by minus slgn.) 5 points HOBBES COMPANY (Debtor-in-Possession) Balance Sheet December 31, 20X2 Assets eBook Print Total current assets References Total assets Liabilities Liabilities not subject to compromise: Current liabilities (post-petition) Total liabilities not subject to compromise Liabilities subject to compromise (pre-petition): Total liabilities subject to compromise Total liabilities Shareholders' Equity Total shareholders' equity Total liabilities and shareholders' equity