Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $168 Current liabilities $42

The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars).

Balance Sheet
Current assets $168 Current liabilities $42
Net fixed assets 153 Advance payments 78
Goodwill 15 Reserves 6
$6 preferred stock, $112.50 par value (1,200,000 shares) 135
$10.50 preferred stock, no par, callable at $150 (60,000 shares) 9
Common stock, $1.50 par value (6,000,000 shares) 9
Retained earnings 57
Total assets $336 Total claims $336

Income
Net sales $540.0
Operating expense 516.0
Net operating income $ 24.0
Other income 3.0
EBT $ 27.0
Taxes (50%) 13.5
Net income $ 13.5
Dividends on $6 preferred 7.2
Dividends on $10.50 preferred 0.6
Income available to common stockholders $ 5.7

Verbrugge and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $6 preferred will be exchanged for one share of $2.10 preferred with a par value of $37.00 plus one 10% subordinated income debenture with a par value of $75.5. The $10.50 preferred issue will be retired with cash.

Construct the projected balance sheet while assuming that reorganization takes place. Show the new preferred stock at its par value. Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places. The projected balance sheet (in millions of dollars) follows:

Current assets $ Current liabilities $
Net fixed assets $ Advance payments $
Goodwill $ Reserves $
Subordinated debentures $
$2.1 preferred stock, $37 par value (1,200,000 shares) $
Common stock, $1.50 par value (6,000,000 shares) $
Retained earnings $
Total assets $ Total claims $

Construct the projected income statement. What is the income available to common shareholders in the proposed recapitalization? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places. The projected income statement (in millions of dollars) follows:

Net sales $
Operating expense $
Net operating income $
Other income $
EBIT $
Interest expense $
EBT $
Taxes (50%) $
Net income $
Dividends on $2.10 preferred $
Income available to common stockholders $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Michael J. Jones

1st Edition

0470058986, 978-0470058985

More Books

Students also viewed these Accounting questions

Question

What is the history of this situation?

Answered: 1 week ago