Exam 20: Corporations in Financial Difficulty

The accounting statement of affairs is prepared:

Which chapters of the Bankruptcy Code deal with corporations?

Briefly explain the three classes of creditors specified in the Bankruptcy Code.

A debtor-in-possession balance sheet should report: I. Liabilities not subject to compromise. II. Liabilities subject to compromise.

Which of the following could be true of the proceedings under Chapter 11 of the Bankruptcy Code?

All of the following items are reported in a statement of realization and liquidation except:

Chapter 7 of the Bankruptcy Code provides for: I. Reorganization. II. Liquidation.

A trustee has been appointed for Smith Company, which is being liquidated under Chapter 7 of the Bankruptcy Code. The following transactions occurred after the assets were transferred to the trustee: 1. Credit sales by the trustee were $100,000. Cost of goods sold were $72,000, consisting of all the inventory transferred from Smith. 2. The trustee sold all $20,000 worth of marketable securities for $15,000. 3. Receivables collected by the trustee: Old: $28,000 of the $50,000 transferred New: $65,000 4. Disbursements by the trustee: Old current payables: $31,000 of the $65,000 transferred Trustee's expenses: $6,000 5. Recorded $24,000 depreciation on the plant assets of $120,000 transferred from Smith. Required: Prepare a statement of realization and liquidation according to the traditional approach illustrated in the chapter.

In a statement of realization and liquidation, unusual revenue items are reported under:

Chapter 11 of the Bankruptcy Code provides for: I. Reorganization. II. Liquidation.

What is defined as a condition in which a company is unable to meet debts as the debts mature?

The payment to general unsecured creditors is often termed:

Typically, the plan of reorganization must be approved by at least _____ of all creditors, who must hold at least _____ of the dollar amount of the outstanding debt.

What are the conditions necessary for using fresh start reporting in reorganization?

In which of the following ways can debt be restructured? I. Assets can be transferred to the creditor. II. An equity interest can be granted to the creditor. III. The terms of the debt can be modified.

Under Chapter 11 proceedings, what represents the fair value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the entity's assets?

What is the general form of the trustee's opening entry, accepting the assets of the debtor company?

_____ have liens, or security interests, on specific assets.

On a debtor-in-possession income statement, which of the following items should be reported under the heading "Reorganization Items"?

A transfer of assets by a company in financial difficulty is considered a sale if: I. the transfer includes a recourse provision allowing the buyer to return the asset. II. the transferee obtains the right to pledge or exchange the transferred assets. III. the transferred assets have been isolated from the transferor. IV. the transferor does not maintain effective control over the transferred assets.