ADVANCED ACCOUNTING-LL
13th Edition
ISBN: 9781260232486
Author: Hoyle
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Textbook Question
Chapter 13, Problem 40P
Kansas City Corporation holds three assets when it comes out of Chapter 11 bankruptcy:
| Book Value | Fair Value | |
| Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $ 86,000 | $ 50,000 |
| Land and buildings . . . . . . . . . . . . . . . . . . . . . | 250,000 | 400,000 |
| Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 123,000 | 110,000 |
The company has a reorganization value of $600,000.
- a. Describe the rules to determine whether to apply fresh start accounting to Kansas City.
- b. If fresh start accounting is appropriate, how will this company’s assets be reported?
- c. If a
Goodwill account is recognized in a reorganization, where should it be reported? What happens to this balance?
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Ataway Company has severe financial difficulties and is considering filing a bankruptcy petition. At this time, it has the following assets and liabilities. The assets are stated at net realizable value.
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8
ABC Company filed for a voluntary bankruptcy which was granted after having submitted all the required papers and documents. You are provided the following information as of June 30, 2022:
Assets
Net Book Value
Liquidation Value
Cash
P 4,997
Investments in equity securities
25,000
P40,000 plus uncollected dividends of P5,000
Accounts receivable, net
54,000
P28,000 expected collection
Inventory
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P100,000 after further processing of P10,000
Prepaid expense
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P2,000 is refundable
Land
140,000
150% of net book value
Building, net
200,000
90% of net book value
Equipment
80,000
30% of net book value
Goodwill
10,000
Liabilities and Equity
Carrying Value
Other Information
Notes payable
P120,000
Secured by inventory
Trade and other payables
100,000
Loans payable
350,000
Secured by land and…
Chapter 13 Solutions
ADVANCED ACCOUNTING-LL
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