Jacobi Supply Company recently ran into certain financial difficulties that have resulted in the initiation of voluntary settlement procedures. The firm currently has $150,000 in outstanding debts and approximately $75,000 in liquidatable short-term assets. Indicate, for each of the following plans, whether the plan is an extension, a composition, or a combination of the two. Also indicate the cash payments and timing of the payments required of the firm under each plan. a. Each creditor will be paid 48 cents on the dollar immediately, and the debts will be considered fully satisfied. b. Each creditor will be paid 80 cents on the dollar in two quarterly installments of 50 cents and 30 cents. The first installment is to be paid in 90 days. c. Each creditor will be paid the full amount of its claims in three installments of 40 cents, 30 cents, and 30 cents on the dollar. The installments will be made in 60-day intervals, beginning in 60 days. d. A group of creditors with claims of $50,000 will be immediately paid in full; the rest will be paid 82 cents on the dollar, payable in 90 days.
Jacobi Supply Company recently ran into certain financial difficulties that have resulted in the initiation of voluntary settlement procedures. The firm currently has $150,000 in outstanding debts and approximately $75,000 in liquidatable short-term assets. Indicate, for each of the following plans, whether the plan is an extension, a composition, or a combination of the two. Also indicate the cash payments and timing of the payments required of the firm under each plan. a. Each creditor will be paid 48 cents on the dollar immediately, and the debts will be considered fully satisfied. b. Each creditor will be paid 80 cents on the dollar in two quarterly installments of 50 cents and 30 cents. The first installment is to be paid in 90 days. c. Each creditor will be paid the full amount of its claims in three installments of 40 cents, 30 cents, and 30 cents on the dollar. The installments will be made in 60-day intervals, beginning in 60 days. d. A group of creditors with claims of $50,000 will be immediately paid in full; the rest will be paid 82 cents on the dollar, payable in 90 days.
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 16P
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Jacobi Supply Company recently ran into certain financial difficulties that have resulted in the initiation of voluntary settlement procedures. The firm currently has
$150,000 in outstanding debts and approximately $75,000 in liquidatable short-term assets. Indicate, for each of the following plans, whether the plan is an extension, a composition, or a combination of the two. Also indicate the cash payments and timing of the payments required of the firm under each plan.
a. Each creditor will be paid 48 cents on the dollar immediately, and the debts will be considered fully satisfied.
b. Each creditor will be paid 80 cents on the dollar in two quarterly installments of 50 cents and 30 cents. The first installment is to be paid in 90 days.
c. Each creditor will be paid the full amount of its claims in three installments of 40 cents, 30 cents, and 30 cents on the dollar. The installments will be made in 60-day intervals, beginning in 60 days.
d. A group of creditors with claims of $50,000 will be immediately paid in full; the rest will be paid 82 cents on the dollar, payable in 90 days.
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