Question 1

A "debtor-in-possession" balance sheet is prepared for a company which:

Accepted Answer

A)  is having its debts restructured. 
B)  is undergoing a liquidation under Chapter 7. 
C)  is undergoing a reorganization under Chapter 11. 
D)  is in bankruptcy reorganization but management still controls the company. 
A)  is having its debts restructured. 
B)  is undergoing a liquidation under Chapter 7. 
C)  is undergoing a reorganization under Chapter 11. 
D)  is in bankruptcy reorganization but management still controls the company. D

Question 2

Under which nonjudicial action do creditors agree to assist the debtor in managing the most efficient payment of creditors' claims?

Accepted Answer

A)  Debt restructuring arrangement 
B)  Creditors' committee management 
C)  Transfer of assets 
D)  Composition agreement 
A)  Debt restructuring arrangement 
B)  Creditors' committee management 
C)  Transfer of assets 
D)  Composition agreement B

Question 3

Eagle Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The following information has been assembled for this statement:    
What amount will be paid to the fully secured creditors and the creditors with priority?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D A

Question 4

Under a composition agreement,

Accepted Answer

A)  creditors agree to accept less than the face amount of their claims. 
B)  debtors in financial difficulty transfer assets "without recourse." 
C)  a creditors' committee is initiated with a plan of settlement proposed by the debtor. 
D)  the debtor petitions for relief in a bankruptcy court. 
A)  creditors agree to accept less than the face amount of their claims. 
B)  debtors in financial difficulty transfer assets "without recourse." 
C)  a creditors' committee is initiated with a plan of settlement proposed by the debtor. 
D)  the debtor petitions for relief in a bankruptcy court.

Question 5

Which of the following observations regarding the use of fresh start accounting is true?

Accepted Answer

A)  It is always required under Chapter 11 bankruptcy proceedings. 
B)  Prior shareholders will have control of the emerging company. 
C)  It results in a new reporting entity. 
D)  It is used under Chapter 7 bankruptcy proceedings. 
A)  It is always required under Chapter 11 bankruptcy proceedings. 
B)  Prior shareholders will have control of the emerging company. 
C)  It results in a new reporting entity. 
D)  It is used under Chapter 7 bankruptcy proceedings.

Question 6

Orville Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The carrying values and estimated fair values of the assets of Orville Company are as follows:   Debts of Orville are as follows:  
Based on the preceding information, what is the estimated dividend percentage?

Accepted Answer

A)  23 percent 
B)  93 percent 
C)  77 percent 
D)  68 percent 
A)  23 percent 
B)  93 percent 
C)  77 percent 
D)  68 percent

Question 7

Creditors may file which type of petition when seeking remedy under the Bankruptcy Code?
I. Voluntary
II. Involuntary

Accepted Answer

A)  I only 
B)  II only 
C)  Either I or II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Either I or II 
D)  Neither I nor II

Question 8

Orville Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The carrying values and estimated fair values of the assets of Orville Company are as follows:   Debts of Orville are as follows:  
Based on the preceding information, what is the total amount of unsecured claims?

Accepted Answer

A)  $113,000 
B)  $126,000 
C)  $93,000 
D)  $121,000 
A)  $113,000 
B)  $126,000 
C)  $93,000 
D)  $121,000

Question 9

The Bankruptcy Reform Act contains chapters which deal with:
I. Individuals.
II. Corporations.
III. Municipal governments.

Accepted Answer

A)  Only I and II 
B)  Only II and III 
C)  Only I and III 
D)  I, II, and III 
A)  Only I and II 
B)  Only II and III 
C)  Only I and III 
D)  I, II, and III

Question 10

Orville Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The carrying values and estimated fair values of the assets of Orville Company are as follows:   Debts of Orville are as follows:  
Based on the preceding information, what estimated amount will be available for general unsecured creditors upon liquidation?

Accepted Answer

A)  $28,000 
B)  $93,000 
C)  $113,000 
D)  $121,000 
A)  $28,000 
B)  $93,000 
C)  $113,000 
D)  $121,000

Question 11

Wilbur Corporation is to be liquidated under Chapter 7 of the Bankruptcy Code. The balance sheet on December 31, 20X8, is as follows:   
The following additional information is available:
1. Marketable securities consist of 2,000 shares of Bristol Inc. common stock. The market value per share of the stock is $8. The stock was pledged against a $20,000, 8 percent note payable that has accrued interest of $800.
2. Accounts receivable of $40,000 are collateral for a $35,000, 10 percent note payable that has accrued interest of $3,500.
3. Inventory with a book value of $35,000 and a current value of $32,000 is pledged against accounts payable of $60,000. The appraised value of the remainder of the inventory is $50,000.
4. Only $1,000 will be recovered from prepaid insurance.
5. Land is appraised at $65,000 and plant and equipment at $160,000.
6. It is estimated that the franchises can be sold for $15,000.
7. All the wages payable qualify for priority.
8. The mortgages are on the land and on a building with a book value of $110,000 and an appraised value of $100,000. The accrued interest on the mortgages is $7,500.
9. Estimated legal and accounting fees for the liquidation are $10,000.
Required
a. Prepare a statement of affairs as of December 31, 20X8.
b. Compute the estimated percentage settlement to unsecured creditors.

Accepted Answer

The answer of Wilbur Corporation is to be liquidated under...

Question 12

Which monthly report shows the results of the trustee's fiduciary actions beginning at the point the trustee accepts the debtor's assets?

Accepted Answer

A)  Statement of affairs 
B)  Statement of realization and liquidation 
C)  Statement of financial position 
D)  Statement of activities 
A)  Statement of affairs 
B)  Statement of realization and liquidation 
C)  Statement of financial position 
D)  Statement of activities

Question 13

The Statement of Realization and Liquidation contains sections for all the following items except:

Accepted Answer

A)  assets. 
B)  supplementary items. 
C)  liabilities. 
D)  stockholders' equity. 
A)  assets. 
B)  supplementary items. 
C)  liabilities. 
D)  stockholders' equity.

Question 14

Which of the following items are likely to be reported in the supplementary items section of a statement of realization and liquidation?

Accepted Answer

A)  Creditors' claims settled during the period. 
B)  Trustee's administration fees. 
C)  New obligations incurred by the trustee. 
D)  Assets subsequently acquired by the trustee. 
A)  Creditors' claims settled during the period. 
B)  Trustee's administration fees. 
C)  New obligations incurred by the trustee. 
D)  Assets subsequently acquired by the trustee.

Question 15

"Preference payments" made by the debtor to one creditor to the detriment of all other creditors within 90 days before the bankruptcy petition was filed:

Accepted Answer

A)  is reduced from the monies available to the general unsecured creditors. 
B)  is usually written off. 
C)  may be recovered and returned to the cash available for all creditors. 
D)  are not recovered, as management assurances are binding. 
A)  is reduced from the monies available to the general unsecured creditors. 
B)  is usually written off. 
C)  may be recovered and returned to the cash available for all creditors. 
D)  are not recovered, as management assurances are binding.

Question 16

A debtor may file which type of petition when seeking judicial protection under the Bankruptcy Reform Act?
I. Voluntary
II. Involuntary

Accepted Answer

A)  I only 
B)  II only 
C)  Either I or II. 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Either I or II. 
D)  Neither I nor II

Question 17

To obtain cash quickly, DebCo. sold $750,000 of its receivables to Finco., with recourse. As the accountant for DebCo., what issues do you need to resolve in order to determine the appropriate accounting treatment?

Accepted Answer

Selling receivables "with recourse" mean

Question 18

As defined by the Bankruptcy Code, creditors with priority:
I. have collateral claim against specific assets.
II. are unsecured creditors who have priority over other unsecured creditors.
III. are the first to be paid from any proceeds available to unsecured creditors.

Accepted Answer

A)  I only 
B)  II only 
C)  I, II and II 
D)  Both II and III 
A)  I only 
B)  II only 
C)  I, II and II 
D)  Both II and III

Question 19

Which of the following observations concerning claims by general unsecured creditors is NOT true?

Accepted Answer

A)  They are paid only after secured creditors and unsecured creditors with priority are satisfied to the extent of any legal limits. 
B)  They often receive less than the full amount of their claim. 
C)  They are entitled to "preference payments" at the discretion of the debtor's management. 
D)  The amounts to be paid to them are usually stated as a percentage of the total claim. 
A)  They are paid only after secured creditors and unsecured creditors with priority are satisfied to the extent of any legal limits. 
B)  They often receive less than the full amount of their claim. 
C)  They are entitled to "preference payments" at the discretion of the debtor's management. 
D)  The amounts to be paid to them are usually stated as a percentage of the total claim.

Question 20

A reorganization value in excess of amounts assignable to identifiable assets is:

Accepted Answer

A)  not reported. 
B)  reported as an intangible asset called Reorganization Value in Excess of Amounts Allocable to Identifiable Assets. 
C)  reported as Goodwill Associated with Exit or Disposal Activities. 
D)  passed on to prior shareholders of the company. 
A)  not reported. 
B)  reported as an intangible asset called Reorganization Value in Excess of Amounts Allocable to Identifiable Assets. 
C)  reported as Goodwill Associated with Exit or Disposal Activities. 
D)  passed on to prior shareholders of the company.

A "debtor-in-possession" balance sheet is prepared for a company which:

Under which nonjudicial action do creditors agree to assist the debtor in managing the most efficient payment of creditors' claims?

Eagle Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The following information has been assembled for this statement: What amount will be paid to the fully secured creditors and the creditors with priority?

Under a composition agreement,

Which of the following observations regarding the use of fresh start accounting is true?

Creditors may file which type of petition when seeking remedy under the Bankruptcy Code? I. Voluntary II. Involuntary

The Bankruptcy Reform Act contains chapters which deal with: I. Individuals. II. Corporations. III. Municipal governments.

Which monthly report shows the results of the trustee's fiduciary actions beginning at the point the trustee accepts the debtor's assets?

The Statement of Realization and Liquidation contains sections for all the following items except:

Which of the following items are likely to be reported in the supplementary items section of a statement of realization and liquidation?

"Preference payments" made by the debtor to one creditor to the detriment of all other creditors within 90 days before the bankruptcy petition was filed:

A debtor may file which type of petition when seeking judicial protection under the Bankruptcy Reform Act? I. Voluntary II. Involuntary

To obtain cash quickly, DebCo. sold $750,000 of its receivables to Finco., with recourse. As the accountant for DebCo., what issues do you need to resolve in order to determine the appropriate accounting treatment?

As defined by the Bankruptcy Code, creditors with priority: I. have collateral claim against specific assets. II. are unsecured creditors who have priority over other unsecured creditors. III. are the first to be paid from any proceeds available to unsecured creditors.

Which of the following observations concerning claims by general unsecured creditors is NOT true?

A reorganization value in excess of amounts assignable to identifiable assets is:

Intercompany Transfers of Services and Noncurrent Assets

Intercompany Indebtedness

Appendix a Intercompany Indebtedness

Consolidation Ownership Issues

Additional Consolidation Reporting Issues

Multinational Accounting: Foreign Currency Transactions and Financial Instruments

Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements

Segment and Interim Reporting

Sec Reporting

Partnerships: Formation, Operation, and Changes in Membership

Partnerships: Liquidation

Governmental Entities: Introduction and General Fund Accounting

Governmental Entities: Special Funds and Governmentwide Financial Statements

Not-For-Profit Entities

Filters

Exam 20: Corporations in Financial Difficulty

A "debtor-in-possession" balance sheet is prepared for a company which:

Under which nonjudicial action do creditors agree to assist the debtor in managing the most efficient payment of creditors' claims?

Eagle Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The following information has been assembled for this statement: What amount will be paid to the fully secured creditors and the creditors with priority?

Under a composition agreement,

Which of the following observations regarding the use of fresh start accounting is true?

Creditors may file which type of petition when seeking remedy under the Bankruptcy Code? I. Voluntary II. Involuntary

The Bankruptcy Reform Act contains chapters which deal with: I. Individuals. II. Corporations. III. Municipal governments.

Which monthly report shows the results of the trustee's fiduciary actions beginning at the point the trustee accepts the debtor's assets?

The Statement of Realization and Liquidation contains sections for all the following items except:

Which of the following items are likely to be reported in the supplementary items section of a statement of realization and liquidation?

"Preference payments" made by the debtor to one creditor to the detriment of all other creditors within 90 days before the bankruptcy petition was filed:

A debtor may file which type of petition when seeking judicial protection under the Bankruptcy Reform Act? I. Voluntary II. Involuntary

To obtain cash quickly, DebCo. sold $750,000 of its receivables to Finco., with recourse. As the accountant for DebCo., what issues do you need to resolve in order to determine the appropriate accounting treatment?

As defined by the Bankruptcy Code, creditors with priority: I. have collateral claim against specific assets. II. are unsecured creditors who have priority over other unsecured creditors. III. are the first to be paid from any proceeds available to unsecured creditors.

Which of the following observations concerning claims by general unsecured creditors is NOT true?

A reorganization value in excess of amounts assignable to identifiable assets is:

Intercompany Transfers of Services and Noncurrent Assets

Intercompany Indebtedness

Appendix a Intercompany Indebtedness

Consolidation Ownership Issues

Additional Consolidation Reporting Issues

Multinational Accounting: Foreign Currency Transactions and Financial Instruments

Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements

Segment and Interim Reporting

Sec Reporting

Partnerships: Formation, Operation, and Changes in Membership

Partnerships: Liquidation

Governmental Entities: Introduction and General Fund Accounting

Governmental Entities: Special Funds and Governmentwide Financial Statements

Not-For-Profit Entities

Filters