PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Chapter 18, Problem 6PS
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Ristoni Company is in the process of emerging from a Chapter 11 bankruptcy. It will apply fresh start accounting as of December 31, 2017. The company currently has 30,000 shares of common stock outstanding with a $240,000 par value. As part of the reorganization, the owners will contribute 18,000 shares of this stock back to the company. A retained earnings deficit balance of $330,000 exists at the time of this reorganization.The company has the following asset accounts:
Book Value
Fair value
Accounts receivable
$100000
$80000
Inventory
112000
90000
Land and buildings
420000
500000
Equipment
78000
65000
The company’s liabilities will be settled as follows. Assume that all notes will be issued at reasonable interest rates.∙ Accounts payable of $80,000 will be settled with a note for $5,000. These creditors will also get 1,000 shares of the stock contributed by the owners.∙ Accrued expenses of $35,000 will be settled with a note for $4,000. Note payable of…
Ristoni Company is in the process of emerging from a Chapter 11 bankruptcy. It will apply fresh start accounting as of December 31, 2017. The company currently has 30,000 shares of common stock outstanding with a $240,000 par value. As part of the reorganization, the owners will contribute 18,000 shares of this stock back to the company. A retained earnings deficit balance of $330,000 exists at the time of this reorganization.The company has the following asset accounts:The company’s liabilities will be settled as follows. Assume that all notes will be issued at reasonable interest rates.Accounts payable of $80,000 will be settled with a note for $5,000. These creditors will also get 1,000 shares of the stock contributed by the owners.Accrued expenses of $35,000 will be settled with a note for $4,000.• Note payable of $100,000 (due 2021) was fully secured and has not been renegotiated.• Note payable of $200,000 (due 2020) will be settled with a note for $50,000 and 10,000 shares of the…
At year-end, XYZ Company canceled 1,000 shares of P10 par value held in treasury at an average cost of P50 per share.
Before recording the cancelation of the treasury share, the company had the following balances:
Number of shares issued - 100,000
Number of shares in the treasury - 11,000
1. What is the number of shares outstanding at year-end?
A. 88,000
B. 89,000
C. 90,000
D. 99,000
2. What is the number of shares issued at year-end?
A. 88,000
B. 89,000
C. 90,000
D. 99,000
Chapter 18 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 18 - Prob. 1PSCh. 18 - Tax shields Here are book and market value balance...Ch. 18 - Prob. 3PSCh. 18 - Tax shields The firm cant use interest tax shields...Ch. 18 - Financial distress This question tests your...Ch. 18 - Prob. 6PSCh. 18 - Prob. 7PSCh. 18 - Debt ratios Rajan and Zingales identified four...Ch. 18 - Prob. 9PSCh. 18 - Pecking-order theory Fill in the blanks: According...
Ch. 18 - Financial slack For what kinds of companies is...Ch. 18 - Tax shields Compute the present value of interest...Ch. 18 - Tax shields Suppose that Congress sets the top...Ch. 18 - Tax shields The trouble with MMs argument is that...Ch. 18 - Tax shields Look back at the Johnson Johnson...Ch. 18 - Agency costs Let us go back to Circular Files...Ch. 18 - Agency costs The Salad Oil Storage (SOS) Company...Ch. 18 - Prob. 20PSCh. 18 - Agency costs The possible payoffs from Ms....Ch. 18 - Leverage targets Some corporations debtequity...Ch. 18 - Prob. 25PSCh. 18 - Trade-off theory The trade-off theory relies on...
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