QUESTION 1

Reorganization items for a firm undergoing reorganization on the income statement are likely to include all of the following except:

		Gains and losses resulting from adjusting existing book values of liabilities to the amounts likely to be allowed
		Penalties from cancelation of purchase contracts
		Interest income on investment of excess cash
		Gains on settlements of prepetition liabilities

QUESTION 2

In emerging from reorganization under Chapter 11 of the bankruptcy laws, a company will issue new voting shares to various creditors and to prior stockholders. To qualify for fresh start reporting:

		Existing stockholders must receive less than 50% of the new shares
		Existing stockholders must receive less than 25% of the new shares
		Creditors must receive at least 90% of the new shares
		Creditors must receive at least 75% of the new shares

QUESTION 3

Reorganization value for a Chapter 11 is:

		Fair value of assets to remain and fair value of assets to be sold
		Fair value of assets to remain
		Fair value of assets to be sold
		Book value of assets to remain plus fair value of assets to be sold

QUESTION 4

"Assets to be realized" represent what on a statement of realization and liquidation for a period.

		The realizable value of assets on hand at the beginning of the period.
		The book value of assets sold during the period.
		The realizable value of assets sold during the period.
		The book value of assets on hand at the beginning of the period.

QUESTION 5

In a troubled debt restructuring, assets with a book value of $180,000 and a fair value of $250,000 are transferred in full settlement of a $300,000 debt.

How is this reported using the criteria for accounting by debtors on page 684.

		Gain on restructuring, $120,000
		Gain on asset disposition, $70,000; Gain on restructuring, $50,000
		Gain on restructuring, $50,000
		Gain on asset disposition, $50,000; Gain on restructuring, $70,000