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Corporate Liquidation

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jecille magalong
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49 views15 pages

Corporate Liquidation

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jecille magalong
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Search, Player Login ® Search Download presentation We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system, Share buttons are alittle bit lower. Thank you! Buttons: Cancel Download De he Video sideshow Download presentation by Jeanne M. David, Ph.D., Unjy. of Detroit Mercy to accompany Advanced Accounting, 10" edition by Floyd A. Beams, Robin P. Clement, Joseph H. Anthony, and Suzanne Lowensohn © Peatsea Educstioa, Inc. publishing as Prentice Hall ma Download the Business Guide Learn How NetSuite Can Be The Last Business System You'll Ever \ Oracle NetSuite Published by Erik Blanding Modified over 7 years ago ° Embed Download presentation — ‘Accounting for Legal 5. Reorganizations We think you have liked this presentation. If you wish to download i, please recommend ito your friends in any social #4 Liquldations crate NetSuite __systerp. Share buttons are alte bit ower. Thank you! © Download the BusinésBurdé x Buttons: a Download presentation Chapter 20 eye oe in Financial titan tag Presentation on theme: “Chapter 17: Corporate Liquidations and Reorganizatons"— Presentation transcrip XM Download preseStarser 17: Corporate BCI SY WH] ay Liquidations and Reorganizations Beams, Advanced Accounting 10e, Ch. 17 42/2017 \We think you have liked this presentation. Ifyou wish to Chapter 17: Corporate Liquiddeieninanti i phrgse iaatammend it to your friends in any social] by Jeanne M, David, Ph.D, UsjstefMethoitserepns area ttle bit lower. Thank you! to accompany Advanced Accounting, 10th edition by Floyd A. Beams, Robin P. GURGAE: Joseph H. Anthony, and Suzanne Lowensohn (© Pearson Education, Inc. publishing 1s P-2tic= tal 7A © Pearson Education, Inc. publ.aing 3s Prentice Hall 54 1 2 Corporate Liquidations: Objectives Accounting for Understand differences among types of bankruptcy filings. Legal Comprehend trustee responsibilities and accounting during liquidation, Reorganizations “y Understand financial reporting during reorganization. and © Understand financial reporting after emerging from reorganization, including fresh- Liguidatons meting Tae start accounting (© Pearson Education, Inc. publishing as Prentice Hall 172 3B 1: Types of Bankruptcies Corporate Liquidations and Reorganizations 1: Types of Bankruptcies © Pearson Education, Inc. publishing as Prentice Hall 173 4 _ Insolvency Equity insolvency Inability to pay debts on time May avoid bankruptcy proceedings Negotiate directly with creditors Bankruptcy insolvency Having total debts in excess of the fair value of assets May be liquidated, or Reorganized © Pearson Education, Inc. publishing as Prentice Hall 174 ‘ye Dei nis 5. Types of Bankruptcies Chapter 7: Liquidation Trustee appoint to sell assets of business Chapter 8: Adjustments of Debts of a Municipality Chapter 11: Reorganization Debtor is expected to be rehabilitated Chapter 12: Farmers Chapter 13: Adjustment of Debts of an Individual with Regular Income \6 Pearson Education, Inc. oublishing as Prentice Hall gh Any 8S Lh Court action Dismiss a case ‘Accept the petition Chapter 11 reorganization HABE ARSLBERER ation ‘yom Dot PD, i of ea © Pearson Education, Inc. publishing as Prentice Hell 176 scans We think you have liked this presentation. If you wish to Advance Acouning dia itn@lS25e (SgQqMeNd it to your friends in any social ‘Fo. Ba, Rei Ck, 7_ bute o runes GEE AE ST ett lower honk you tet tem Investigate debtor's financial afairs Provide information Buttons: In reorganization cases, in ada’ “an ty abrve 54 © Pearson Education, Inc. publishing as Prentice Hall bow tut 55 177 expan i iquidati Advanced Accounting, Ranking of Claims: Liquidation ieee — © Pearson Education, Inc. publishing as Prentice Hall Jog Ax Sune 178 Q 2:Corporate Liquidation Corporate Liquidations and Reorganizations 2: Corporate Liquidation a © Pearson Education, Ine, publishing as Prentice Hall 179 10 Statement of Affairs Legal document prepared for bankruptcy court Assets at expected net realizable values Classified on basis of availability for classes of creditors. Liabilities are classified Priority, fully secured, partially secured, unsecured Historical values included for reference © Pearson Education, Inc. publishing as Prentice Hall 17-10 hit 11 © Pearson Education, inc. publishing as Prentice Hall 701 Accounting for Legal 412 © Pearson Education, inc. publishing as Prentice Hall Reorganizations 1792 and Liquidations 13. Trustee Accounting At start of case New set of books Through case Records transactions = aaa Staternent of cash receipts and disbursements Siaterent of changes in estate equity 178413 14 3:Corporate Reorganization Crp ces rE eran ina ond 3: Corporate Reorganization 4; me ei Di © Pearson Education, Inc. publishing as Prentice Hal 8 We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social Dy FB, Rtn Ca 15 Chapter 11: Balance, Sh@sf, share buttons are a little bit lower, Thank you! einii Prepetition liabilities subject to compromise are reported as a separate line item in liabilities Buttons: Arose before filing Include Unsecured and under-secured liabilities, Prepetition secured liabilities ar.J pot pei ables report nal fhion Prepettion clams dscovered afte ling Chap: Basis Comino Included at court allowed amounts ‘ome De, PD, Ui ofa lo © Pearson Education, Inc. publishing as Prentice Hall d 1715 wae Advanced Accounting es ‘by Flo! Reams, Rei. Chaa, 16 Chapter 11: Other Statements econ Reorganization costs shown separately Interest to be paid or probable amount Differences from contractual amounts should be noted Expected stock or stock equivalent issuances should be disclosed Cash flow items related to reorganization shown separately © Pearson Education, Inc. publishing as Prentice Hall 17.16 rhe ed oie 17. Combined Financial statements wl Condensed combined financial statements are prepared for all entiles in Alrne cong a reorganization proceedings as supplementary information in intercompany recelvables and payables Write-down necessary © Pearson Education, Inc. publishing as Prentice Hall me =m 18 4: Emerging from Reorganization Corporate Liquidations and Reorganizations : 4: Emerging trom Reorgaization Corporations © Pearson Education, inc. publishing as Prentice Hall 4 Hanno] oe in Financial Difficulty 419 Reorganization Value Approximates fair value of entity without considering abies Discounted future cash flows of reorganized business Consider business and financial risk Reorganization value determines how much creditors recover “Emerging business will either use 20 Qualify for Fresh Start Reporting Just before confirmation of the plan, Revaluation value must be less than post petition liabilities and allowed claims, and oles of exiting voting sha ATG BPESBARMENP e™erEngenty © Pearson Education, Inc. publishing as 17:20 entice Hall We think you have liked this presentation. If you wish to 21. Apply Fresh Start Reppssipgd it, please recommend it to your friends in any social Allocated reorganization valusyteeitestiabloutseetsare a litle bit lower. Thank you! Unallocated amount is an intangible Reorganization value in exceBHSIFounts allocated to identifiable assets Liabilities at current value at confirmation date Deferred taxes follow FASB No, (09 Prepare final reports of old entity © Pearson Education, Inc. publ..ing s Prantice Hall Chapter 20 1721 22. Reorganization Example Tiger files for protection under Chapter 11. on 1/5/08. Accordingly, it reclassifies prepetition liabilities. It obtains short term financing, acquires additional equipment and continues operations through 6/31/09 when the plan is approved First, we'll look at the statements pre and post reorganization. Then we'll go through the entries and adjustments that occurred, © Pearson Education, Inc. publishing as Prentice Hall 17-22 WOW THCY in Financial racer La 23 Balance Sheet Assets Cash 50 150 300 Accounts receivable 500 350 335 Filed 1/5/08 ‘ome Det, Ui of aa FYE 12/31/08 cn Before Advanced Accounting, 30/09 vetint onah Fair value 6/30/09 Te fevali- ation inane [oe cash 50 150 300 Accounts receivable 500 Chap 13 350 335 Inventory 370 375 meses 25 iter current asets Corporations: Ets on Retained Eamings and the Income Statement 425 (75) Equipment, net 330 290 260 30 Potent We think you have liked this presentation. If you wish to 125 download it, please recommend it to your friends in any social (128) system, Share buttons are a little bit lower. Thank you! Reorganization value in excess of entifiable assets 250 2,100 2,050 2,055, 54 1,950 (105) 2,200 © Pearson Education, Inc. publishing as Prentice Hall 17-23 Download presentation 24 Changes to Assets Fair values and revaluation amounts are shown on 6/30/09 for comparison Tiger continues operations, records depreciation and even acquires equipment from filing on 1/5/08 to reorganization on 6/30/09. The reorganization revalues the assets to their fair value on that date. Patents are completely written off Tiger records an intangible "Reorganization value in excess of identifiable assets" of $250, Not all reorganizations result in this intangible. © Pearson Education, Inc. publishing as Prentice Hall 17-26 25 Balance Sheet - Liability & Equity Filed 1/5/08 FYE 12/31/08 Before 6/30/08 AFTER 6/30/09 Short term borrowing (post) 150 75 Accounts payable (pre/post) 600 100 125 ‘Wages payable (post) 5055 Taxes payable (pre) ‘Accrued bond interest (pre) 90 Wote payable (pre) The Balance Sheet and Income Sue Melos 15% bonds payable (pre) 41,200 abilities subject to compromise 2,300 Capital stock (ola) Capital stock (new) 800 [Additional paid in capitar__ We think you have liked this presentation, Ifyou wish to Deficit download it, please recommend it to your friends in any social (700) system. Share buttons are a little bit lower. Thank you! (1,050) (1,000) 2,100 2,050 2,055 54 2,200 © Pearson Education, Inc. publishing as Prentice Halt 17.25 Download presentation Button: 26 What Happened to Liabilities? Upon filing on 1/5/08, Tiger reclassifies the unsecured and partially secured liabilities at that point as Pre-petition Liabilities subject to compromise. Pre-petiti subject to compromise are reclassified or settled according to the plan. Accounts payable on 12/31/08 does not include any of the $600 due prior to filing. Taxes payable are still to be paid, and eventually recorded again in full. © Pearson Education, inc. publishing as Prentice Hall 17-26 27. Changesin Equity Some of the creditors receive stock in the reorganized firm. The old shareholders also receive stock, but now own only $100 of $800 of the stock at book value. ‘Although some APIC was recorded in reorganizing, it was subsequently eliminated, IFit had been sufficient to wipe out the deficit, no intangible "reorganization value in excess of identifiable assets" would be recorded. The Deficit is removed: Fresh Start! © Pearson Education, Inc. publishing as Prentice Hall 17.27 28 Can Tiger Use Fresh Start? Post-petition liabilities $255 Allowed claims 2,300 Total liabilities $2,555 Less reorganization value (2,200) Excess liabilities Nass 17.28 29. Reorganization Plan: 6/30/09 Pre-petion Libis 3nd E96 hnload presentation Caper 6 Pari Ling New Agreements {yaw Mei PAD Ui of a a Debt Dis-charge oad 15% partially secured senor ea io have liked ss peemaaticn Ifyou wish to Avance Aconning $500 new stock, 500 senior Sei BSA MERU PEUUMAEHBTES IR TACHA any socal im chem nat $100 system, Share buttons are a little bit lower. Thank you! So fay, toe Priority tax claims $150 ‘Tobe pai cash once confrosttons 4 : so Remaining unsecured claims, ¢ °50: '$600 accounts payable $275 subordinated debt and $. “Oru. steck 54 $185 \ $90 accrued interest ‘ome De PD, Ui ofa $90 f $260 note Amn cig $120 subordinated debt and $60 new stock Josep H. Axton, sod Suzsane Loweasaha $80 Total de charged a : is Oe stock S100 ew stock taut Seton tenn uber ace a Eset! America's Most Popular Business Activity, Bringing 30 Record New Debt Agreements ‘an End tothe Controversy Liabilities subject to compromise (pre) dn tee Ase 2,300 "esi Taxes payable Fc Tg 150 12% senior debt 500 12% senior debt- current 100 395 ‘yd od PA i of eg Common stock (new) ~ Advani Gain on debt discharge ‘inet Atos we 455 Jos at, See amet settlement of prepetition claims ‘This entry reclassifies the pre-petition debt according to the reorganization plan. - E © Pearson Education, Inc. publishing as Prentice Hall 17-30 v 400 exchange of stock with owners They will lose control since creditors have $700 of common stock. © Pearson Education, Inc. pupishing as Prentice Hall 17.31 jownload presentation ue Asse r 32._ Revalue Assets 05s 0 FFE ou fave Ikea fis presentation. Ifyou wish to Inventory download i, please recommend ito your friends in any soca 2s system. Share buttons are a little bit lower. Thank you! Land 100 Button: Loss on asset revaluation 105 Buildings, net 75 54 Equipment, net 30 Patent 125 revalue assets to fair value A loss is recorded in revaluing the assets. Refer back to the Asset side of the balance sheet. © Pearson Education, Inc. pul 1732 ing as Prentice Hall 32 Calculate Balance in Retained Earnings (Deficit) (1,000) Gain on debt discharge 455, Loss on asset revaluation (105) Final measure of deficit, 6/30/09 (5650) Write-off Additional paid in capital 400 Reorganization value in excess of identifiable assets (intangible asset) (5250) If sufficient APIC had existed, there would be no intangible asset, and excess APIC ‘would remain on the balance sheet, © Pearson Education, Inc. publishing as Prentice Hall 17.33 34 Eliminate Deficit in Equity Reorganization value in excess of identifiable assets 250 Gain on debt discharge 455 ee Additional paid in capital 400 Yass an asset revaliiation © Pearson Education, Inc. publishing as Prentice Hall 17-34 35 _ Simplifying AssumPB8Hyn load presentation Alltransactions are recorded on 6/30/09. Generally his takes some time. Creditors may have interest between submission and approval of pian. All pre-petition debt is approved think you have liked this presentation, If you wish to ‘The $2,200 reorganization val. Bd Be LORRI HRERCELS SPHERE Hy social firm valuation model. fem, Share buttons are alittle bit lower. Thank you! Paty © Pearson Education, Inc. publishing as Prentice Fall 1735 Buttons: 36 Disclosures Adjustme ist tis’)iice! Debt forgiveness ‘alt os Aissts Llebi'“es Prior retained earnings or defic.. ely inated 54 Reporting and Analyzing Significant factors in determining the reorganization value Cash Flows © Pearson Education, ne, publishing as Prentice Hall 17:36 37 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall tape tT All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America, Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall © Pearson Education, Inc. publishing as Prentice Hall 1737 BINUS university Gea Download ppt "Chapter 17: Corporate Liquidations and Reorganizations” Download presentation Chapter 23 We think you have liked this presentation. If you wish to me download it, please recommend it to your friends in any social ear system, Share buttons are a litle bit lower. Thank you! hentai hen iesychteeaeBULCONS! #5 Similar presentations ‘The Statement of Cash Flows Chapter 4 era ‘yam M Dav PD. Unf er Moy twaccompney | Advanced Accounting, We dion ‘pF A Bes bin. Cee, CUTEST) haper20 Bankupcyand Chapter Ten ones ‘The Statement of Cash Flows Financial jwnioad misentation projections Chapter 14 | think you have liked this presentation. If you wish oad it, please.recommend it to your friends in a system, Share buttons are a itle bit lower. Thank you! Chapter Thirteen ‘Accounting for by ame M Dav, PD, Unf eR oe d teorganizations Adsanced Accounting. 0 diva and ‘by Find A. Beams Robin. Ce, Liquidations ney Antony bd Seana Lawes Business Combinations: ‘America’s Most Popular Business Activity, Bringing an End to the Controversy Fc Ta eC by dean Davi, PD, ne. en a soacompany Advanced Accounting, Win ‘by Fayd A Beams, Habla F.C, och H ation ind Suan Lone ‘by Jae. David PD. Us f OTE STATE Advned Acounan aaa Corporate Finance aoe ty Floyd A. Beams, Hin. Cemest, Yo a 1d eam sere PND. Uni of Deri erey ‘by Jeane M, Davi, PRD. Un of ti ee sv omoaey ‘by eam M. Dvd PR Unf A ace sonny Advanced Accounting, weston Advanced Accounting, 1

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