Smith Corporation has gone through bankruptcy and is ready to emerge as a reorganized entity on also the anticipated future cash flow

Book Value Fair Value

Accounts Receivable $20,000 $18,000

Inventory 143,000 111,000

Land and Building 250,000 278,000

Machinery 144,000 121,000

Patents 100,000 125,000

The company has a reorganization value of $800,000.

Smith has 50,000 shares at $10 par value common stock outstanding. A deficit retained earnings balance of $670,000 also is reported. The owners will distribute 30,000 shares of this stock as part of the reorganization plan.

The companys liabilities will be settled as follow:

Accounts payable of $180,000 (existing at the date on which the order for relief was granted will be settled with an 8% year note for $35,000.

Accounts payable of $97,000 incurred since the date on which the order for relief was granted will be paid in the regular course of business.

Note Payable First Metropolitan Bank of $200,000 will be settled with and 8% 5 year note for $50,000 and 15,000 share of the stock contributed by the owners.

Note payable Northwestern Bank of Tulsa of $350,000 will be settled with a 7% 8 year note for $100,000 and 15,000 shares of the stock contributed by the owners..

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