Question
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
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 |
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