QUESTION 16

A company owes the bank $500,000 plus accrued interest of $30,000. Since the company cannot pay this debt, the bank agrees to allow the company to pay $400,000 in two years, plus interest annually at 8% ($32,000/year).

What is the gain on restructuring to be recorded as a result of this agreement as reflected on page 684?

		130,000
		66,000
		80,000
		100,000

QUESTION 17

Condition(s) that must exist for a transaction to be considered a troubled debt restructuring is/are:

		Creditors accept stock or subordinated debt as payment in full.
		The debtor is experiencing financial difficulties, and the restructuring constitutes a concession by the creditor.
		Creditors allow payment of less than the book value of liabilities as payment in full, without any additional concessions.
		The debtors assets must be overvalued on its balance sheet, and creditors allow payment of less than the book value of liabilities as payment in full.

QUESTION 18

Identify the false statement in relation to Ch 7 liquidations?

		Proceedings begin when the debtor firm files a petition with the bankruptcy court
		The firm's assets are turned over to a trustee, to be sold.
		The firm is allowed to remain in possession of its assets.
		After all assets are distributed and remaining debts are discharged, the debtor company ceases to exist.

QUESTION 19

Ch 7 bankruptcy liquidations use the following financial reports:

		Balance Sheet and Statement of affairs
		Statement of affairs and Statement of realization and liquidation
		Statement of affairs and income statement
		Balance sheet and Income statement

QUESTION 20

Which unsecured liability in a liquidation case has priority?

		unpaid wages
		amounts due to bondholders
		amounts due to suppliers
		unpaid bank loans