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The Warren Company is emerging from bankruptcy reorganization. It's reorganization value is $3 million while allowed claims plus debts incurred during bankruptcy are $4 million.
The Warren Company is emerging from bankruptcy reorganization. It's reorganization value is $3 million while allowed claims plus debts incurred during bankruptcy are $4 million. The previous owners continue to hold 42% of the company's capital stock as it emerges from bankruptcy. Which of the following is true? Multiple choice question. Fresh start accounting is required because the reorganization value is less than the allowed claims plus the debts incurred since reorganization. Fresh start accounting is not allowed because the previous owners still hold 42% of the outstanding stock. Fresh start accounting is required if a reorganization value is below the debt amount and the previous owners now hold less than 50% of voting stock. Fresh start accounting is not allowed because the company only has a reorganization value of $4 million
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