Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 20, Problem 20.3.3E
To determine
Introduction: Liquidation is the process of bringing an end to the life of the company. Its assets are realized, liabilities are paid off and surplus if any, is distributed amongst the contributories. By liquidation, the legal existence of a company comes to a hault.
To choose: The statement that stands correct
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Choose the correct. Which of the following is not a liability that has priority in a liquidation?a. Administrative expenses incurred during the liquidation.b. Salary payable of $1,250 per person owed to 26 employees.c. Payroll taxes due to the federal government.d. Advertising expense incurred before the company became insolvent but not recorded until after the order of relief.
A Chapter 7 bankruptcy is a(n)
Select one:
a.voluntary reorganization.
b.bankruptcy forced by a company's creditors.
c.bankruptcy in which all creditors receive payment in full.
d.involuntary reorganization.
e.liquidation.
Choose the correct. When does the liquidation basis of accounting first have to be applied to financial statements of a liquidating entity to be viewed as in conformity with U.S. GAAP?a. When an involuntary bankruptcy petition is approved by the court.b. When liquidation is imminent.c. When the first asset is sold.d. At least 90 days before the final asset is sold.
Chapter 20 Solutions
Advanced Financial Accounting
Ch. 20 - What are the nonjudicial actions available to a...Ch. 20 - What is the difference between a Chapter 7 action...Ch. 20 - Prob. 20.3QCh. 20 - What is usually included in the plan of...Ch. 20 - Prob. 20.5QCh. 20 - Prob. 20.6QCh. 20 - Prob. 20.7QCh. 20 - Prob. 20.8QCh. 20 - How is the statement of affairs used in planning...Ch. 20 - What are the financial reporting responsibilities...
Ch. 20 - Prob. 20.11QCh. 20 - Creditors' Alternatives The creditors of Lost Hope...Ch. 20 - Prob. 20.3CCh. 20 - Prob. 20.1.1ECh. 20 - Prob. 20.1.2ECh. 20 - Prob. 20.1.3ECh. 20 - Prob. 20.1.4ECh. 20 - Prob. 20.1.5ECh. 20 - Prob. 20.2ECh. 20 - Prob. 20.3.1ECh. 20 - Prob. 20.3.2ECh. 20 - Prob. 20.3.3ECh. 20 - Prob. 20.3.4ECh. 20 - Prob. 20.3.5ECh. 20 - Chapter 7 Liquidation Penn Inc.'s assets have the...Ch. 20 - Prob. 20.5ECh. 20 - Chapter 11 Reorganization During the recent...Ch. 20 - Prob. 20.7PCh. 20 - Chapter 7 Liquidation, Statements of Affairs...Ch. 20 - Prob. 20.9P
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- Choose the correct. In a bankruptcy, which of the following statements is true?a. An order for relief results only from a voluntary petition.b. Creditors entering an involuntary petition must have debts totaling at least $21,625.c. Secured notes payable are considered liabilities with priority on a statement of affairs.d. A liquidation is referred to as a Chapter 7 bankruptcy, and a reorganization is referred to as a Chapter 11 bankruptcy.arrow_forwardChoose the correct. Which of the following is not an expected function of a bankruptcy trustee?a. Filing a plan of reorganization.b. Recovering all property belonging to a company.c. Liquidating noncash assets.d. Distributing assets to the proper claimants.arrow_forwardWhat is Chapter 7 liquidation and Chapter 11 reorganization? When should each be used? Please choose one company that has gone through either type of bankruptcy proceeding and describe the circumstances leading up to the filing.arrow_forward
- Choose the correct. An involuntary bankruptcy petition must be filed bya. The insolvent company’s attorney.b. The holders of the insolvent company’s debenture bonds.c. Unsecured creditors with total debts of at least $15,775.d. The company’s management.arrow_forwardIn a bankruptcy, which of the following statements is true? a. An order for relief results only from a voluntary petition. b. Creditors entering an involuntary petition must have debts totaling at least $21,625. c. Secured notes payable are considered liabilities with priority on a statement of affairs. d. A liquidation is referred to as a Chapter 7 bankruptcy, and a reorganization is referred to as a Chapter 11 bankruptcy.arrow_forwardWhich of the following is not a liability that has priority in a liquidation?a. Administrative expenses incurred during the liquidation.b. Salary payable of $1,250 per person owed to 26 employees.c. Payroll taxes due to the federal government.d. Advertising expense incurred before the company became insolvent but not recorded until after the order of relief.arrow_forward
- Which of the following is not an expected function of a bankruptcy trustee?a. Filing a plan of reorganization.b. Recovering all property belonging to a company.c. Liquidating noncash assets.d. Distributing assets to the proper claimants.arrow_forward14-9 In a normal liquidation situation, ___________ are lower than preferred stockholders on the priority list of claims on liquidation proceeds. Select one: a. contributions to employee benefit plans b. consumer claims c. common stockholders d. unsecured creditors e. administrative expenses associated with the bankruptcyarrow_forwardTo be eligible for Chapter 7 bankruptcy, the debtor must satisfy the _______ that compares income to debt a. credit test b. bankruptcy test c. means test d. income testarrow_forward
- Chapter 13 bankruptcy provides for: a. adjustment of debts of persons with regular income b. reorganization of a corporation c. liquidation proceedings d. none of the abovearrow_forwardChoose the correct. What accounting is made for professional fees incurred during a bankruptcy reorganization?a. They must be expensed immediately.b. They must be capitalized and written off over 180 months or less.c. They must be capitalized until the company emerges from the reorganization.d. They are either expensed or capitalized, depending on the nature of the expenditure.arrow_forwardA reorganization under Chapter 11 of the Bankruptcy Code Amendments will be approved by the courts even if creditors receive less than would be the case with a Chapter 7 liquidation. True or Falsearrow_forward
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