question 10

The purpose of Chapter 7 of the Bankruptcy Reform Act is to regulate the process of liquidation by providing an orderly and equitable structure for the selling of assets and settling debts.

True

False

Question 11

When there is a debtor in possession during a reorganization, the owners retain possession of the assets, continue to operate the business, and have the primary responsibility to develop an acceptable plan of reorganization.

True

False

Question 12

In a liquidation, all assets are liquidated (sold) and liabilities paid up to the amount received for the assets, in order of priority and subject to collateral agreements. In a reorganization, the company attempts to continue business.

True

False

Question 13

the three categories of assets in a Statement of Financial Affairs do NOT include?

Pledged with fully secured creditors

pledged with partially secured creditors,

restricted assets

free assets.

Question 14

The trustee must recover all properties belonging to the insolvent company and preserve the estate from further deterioration.

True

False

Question 15

The trustee is required to make proper recording of all activities and report them to the court and interested parties.

True

False

Question 16

The common elements in a reorganization proposal are plans for proposing changes in the companys operations, plans for generating additional monetary resources, plans for changes in management of the company, and plans to settle debts that existed when the order of relief was filed.

True

False

Question 17

GAAP requires that assets on the balance sheet will continue to be reported at their book values; however, liabilities that are subject to compromise should be reported at expected amounts to settle claims. Additionally, assets and liabilities are not classified as current/noncurrent.

True

False

Question 18

GAAP requires that all revenues, gains, losses, and expenses resulting from the reorganization should be reported separately. Such items are placed on the income statement before any income tax expense or benefit.

True

False