waa MULTIPLE CHOICE PROBLEMS: aon porent, having purchased 80% of Sand Co, rae PBIOD, Sond Company is in nancial cicuty ort On, trsecured loon of PADD. 000 to the subsidiary. An accounting state, en ett 4h Cangary shows adden of 0B Port Corporation can expect iorecat! weeny ivesmentinSord Company of approximately: ently ‘0.6000 , c. P1600 a b. Peoo0 apo i, 2. Teflovingles were dpoyedin the statement of ffs or Luibbocy or 80K + bk + 108- 5k = ona ea monet Est. dmount available Sockoldes' equi % | Loss on relation of assets. : 5009 ‘91k 4.5K - 10k = 76.5k -Tobamated adminatve cos thai have not been entered 5000 tunseéuted wio prichty "nthe accountng record. vo 76. al = 0186 or 85%, Unsecited abies wth priory... sad on he foeg0rg ifomaton, what percentage oftheir loins rf credo epact 0 receive on the iquidation of lubbock c | ee c. 86.50% ompany: tas Dik a. 100% 4 Lotesde Bonk holds 0 100000 note secured by a bulking owned Horulcivng which has ted for bankruptcy the propery has a book ye! ond fo met vos of PADI, what i the. best way to describe tha < lapy PArtially Secured - secgid Bork ond Inst Company? The bank has an) "oe hay «secured claim of 100,00. 'b, unsecured claim of P100,000. di secured clin of F100 000 and an unsecured claim of P20,000 4, Seat Compony led a voluntary banknyptcy petition, and the statement ofa, the folowing omounis: "ee Estimated Ass E Book Value Cuenta 4,110 ‘sels pledged With fly secured creditors... P- 900,000 P Ltlocp 960 ‘Asels pledged porialy secured creditors...” 540,000 4 40009 (210) 4 1,260,000 ve razon. mae 1,080 ° P 210,000 780,000 Portal secured creditors Unsecured credits. Assume the assefs ore converted to cash at thei ‘estimated current values. What amount Cash wb ovalable fo pay usecuted nor arty claims? P7200 c. P 960,000 8. Pom adqULTIPLE CHOICE PROBLEMS fat UL TINE R O TN AR OBL EMS 5, Dobby Corporation wos forced info banuptcy ond i inthe proces of fcuidoting assls 75k - 25k 450 "and pojng clams. Unsecured claims wil be paid ot the rte of tity cens on the peso. Cason hold @ note receivable from Dobby for F75,000 coloerived by an asset with a book valve of P50000 ond « fqudation vave of P25000, The amount fo be reoued by Cason on his nate 50 x .30 =4 25+ 15= 72500 c. Ps0CtO 5 PO & Fst 4, Poor Company fied c voluntary bankcuptcy pion, andthe settlement of as reflected the folowing mounts: Estimated ase RcokVobe * Curent Voe Asses pledged wih uly secured cedtos. P 450000. P SS5000 ‘Assets pledged parliolly secured creditors... 270,000 180,000 Free ose i om _ 40.000 Pusoond FLAS 000 Uobiities abilities with pio secon P 105000 fuly ecwed credits oon 565 Patil secured crdtos. sooera 480 Usecued credion seco (105) 1.05000 G20) sue the csels oe converted to cas othe estimated curent vives. What amount of bao cath ilbe ovalobe fo poy ursecited norptyclost a. F000 c. PAB) 000 b. PéROO0 1. Taget Cxporton wos forced ino bark andisin he proces ofaidalng ase ond aoying clas, Unsecured claims wil be pid a he rate of tity cers ch the paso, row lé0 held ante receivable tom Target for P9000 colteroied by on cx wh « book value | ‘of P60,000 and a liquidation value of 30,000. The amount fo be realized by Amow on this 60x .30#18 noleis: \ a. F20000 - Peo 30+ 18 448 /b P4B000 d P50,000 {4 Spariman Co. fed « borlrpcy pelon and qudated is noncosh exes. Sparkman was paying fory cenis on the dolar for unsecured ciims, Boley Co, held a mortgage of ‘4o. "150000 on and that wes sold for P110000.The foal amount of payment that Boley shou 150-11= have received calculated tobe 4ox4o%=16 9. -P110000 134000 b. P4400 e. Pén00d 110+ 16 126 coepiasano9 9. Equipment wih a book values of 120,00 sod in idaton proces for cash of P1100, This equipment wos secu for a P1S0000 bank oon Ary reminder consider unsecured. How wud ths ransacton be teported onthe Stafement of Relation and Liquidation? {.. Areduction in non-cosh ass of 120000 1, Aloisrepotted to owners equity ofP10,000 c. A dibusement of cosh to the bork of 110.000, «reduction in portal secured lobiy of P1S0000, ond on increase in unsecured wihout poy icbity of PaganoUse the following information for questions 10 to 12: Onile Company recently petitioned for bankruptcy and is now slotement of affois. The comying volves and estimated fir yoy, "N® Br Company are os folows: Mes fy ‘Caving Voive Set, Cath... P 25.000 ‘ Sa, fecoineccbi “5200 Fite Oe coon Bag i Ee = oom eae ® 580.000 fore Debts of Onvlle are os follows: Esq) ‘Accounts payOble ......--+. niiaenaanits ¥ ‘Wages Payable(ail have priority) Pp Tas payable seca 9) Nees payosle fisted by ecevoble Grd invenion ing eel oF ‘to ond; Poyable fecued by nd and bulding) Bees 2:26 test en bondsPaytl ae 30.+ 98 = 65 Toldagetressteeteee "9 126-65 =61 10. Whotisthe total amount of unsecured claims® me +0. P-93,000 6o+61= 121 b, P1300 ‘oh ‘ 11. What éstimated amount wil be available for general unsecured creqj .P28,000 c. — P113,000 tots Upon 4.121.000 "to, 12. Whatis the estimated dividend percentage? a. 23% b. 93% d. 68% 13, Eagle Company recently petitioned for bankruptcy and is now in the statement of offais, The folowing information has been assembled form Say temens Assets * BookValve timated Cunen’Vaye Cash. +P 70,000 P 700 é 230,000 Other cunent asset 240,000 Buldng 600,000 700 land. 200,000 an Uobiities 5 f . abies with priority. P 40m ‘Mortgage payable (secured by building) 300,000 Note Payable (secured by land) : 400.000 Unsecured bites... 00000 ‘ \What amount wile paid tothe fuly secured creditors and the credttors wih pce fullySecured Creditors Creditors with Priority o. . P300.000 140,000 B.* — P300.000 4P 92,000 cc. P400,000 P 92,000 d.— P700.000 140,000 ti ann i se eerie Advanced Financial Accounting - A Comprehensive: Conceptual & Procedural ApproachMULTIPLE CHOICE PROBLEMS 14. Mandich Co. had the following amounts for its assets, liabilies ond stockholders’ equity ‘oc counts ust before fiing a bankruptcy petifion and requesting iquidation: BokVaue Net Reotsoble Ve Cosh : ‘ojo00 000 ‘Accounts Received tooc00 #000 Inventory... 30000 30000 lond..... oc00 75,000. {ung and Equipment 700.000 soon ‘Accounts POyObIe,....+5 vsseese 100000 Solas Payable..7......: 5 75000 Noles Payable (secured by inventory). - e000 Employee" cloims for dstibuton to pension plons 10000 Tores Payable. ....0.- eses-foosssee = 0000 Liobilty for occrued expenies. 00 . Bonds Payable 00000 ‘Common stock. 200.000 ‘AddiionalPoidn Cori * occ > Reoined Earnings Defic (115000) Of the salaries payable, P35,000 was owed to an officer of the company. The remaining ‘amount was owed fo salaried employees who had not been poid within the previous 60 ddoys: John Webb was owed P10,600, Samantha Jones was owed P15,000, Sondra Johnson ‘was owed 11,900 and Derinis Roberts was owed P2,500. The maximum owed for.ony one employee's cloims for contributions to benefit plans was P00. Estimated expense for ‘administering the Iquidation omounted to P40,000. What was the total amount of unsecured lioblities with priority? a, ° P 75,000 - d. P170,000 b. P185,000 1e.P205,000 cc. P165,000 "Use the following information for questions 15 fo 26: ‘On une 1, 2015, the books of Dremer Corporation show assets with book volueés and realizable values os follows: Reolzoble BockVolve Yobe: ‘coh Piss) P 1as0 ‘AccountsReceivabe (el) 21200 17,600 Note Receivable " 15000-15000 Inventory : 4000 70.000 Invesimentin Coan Stock 500 15.000 (and and Buicing net)" * 78500 72800 Equipment net) son |” _ 800 Totals . Passo lS Dremers books show the folowing babiltiés: " Book Value ‘Accounts Boyce (50,000 secuted by inventory and equipment) P 90425 ‘Wages payable (ete or pony) 3775 ‘Other Accrued Labiies « 4 voc00 Acctuedinterest on notes payable : 375, ‘Accrued interest on mortgage payoble 0 Notes payable [secured by Investment in Colandl tock) ‘o.o00 Marigage payable (secured by land and bud) 70.000 Total PuaSa75 15: Compute the estimated amount available to unsecured creditors (with and without priority) total free assets: ‘Advanced Financial Accounting ~ A Comprehensive: Conceptual & Procedural ApproachCHAPTER 15 —.—_—— 14, Compute the esimated amount available to unsecured creditors without prioity (rel fe, sel) . 17, Compute the amount of unsecured creditors without priority 18, Compute the dividend to unsecured creditors without priority, 19. Compute the estimated payment to fuly secured creditors 20. Compute the estimated amount to parally secured creditors 21. Compute he esimated amount to unsecured creditors with priority 12. Compute he estimated amount to unsecured creditors without priority 23. Compute the esiimoted payment to creditors 124. Computed the esimated deficiency fo unsecured creditors 45. Compute the esimated gain or oss on realization of assets 24, Compute the estimated net [tla loss: {sete following information for questions 27 fo 32: Using the information from Dremer Corporation (refer to previous problem) and the foloning information for he period of 6/1/45 to 6/30/x5. t No subsequent discoveries Sole of Colon Secutties at « market value of P16,000 Colecton of Note Receivable into cash P15,000 Sole of Equipment at P7,000 4 Sole of ventory at P2,000 Patil Payment of Accounts Payable P29,000 Payment of Note Payable P10,375 277. Compute the cash bolance on June 30, 2015 28. Compute the noncash assets on June 30, 0x5: 18, Compute the balance of fly secured liabilities on June 30, 20x5: 3D, Compute the balance of portaly secured liabities on June 30, 20x5: 3}. Compute the bolonce of bites with prioty on June 30, 20x5 2. Compute the balance of fabiltes without priority on June 30, 20%5: Use the folowing information for questions 33 and 34: 8. Tero No Cop. has been undergoing fquidation since January 1. As of Morch 31, i condensed statement of realization and iquidation is presented below: Assets: Assels to be realizes .P 1,375,000 Assets notrealzed. bites: Lobities iquidote ~ Wobilties not iquidated. abies to be liquidated. abies osumed. Revenues and Expenses: ‘Supplementary chorges/debi 3,125,000 Supplementary credis.. The net goin os) fr the tree-month period ending Marci . P250,000 cc. PA25,000 +b (P325,000) d. _ P750,000 34. Compute the ending cash balance of cash accdunt assuming that common stock and deficits oe P1,500,000 and P§00,000, respectively: . 425,000 c. P'1,325,000 b. 575,000 d. P1,375,0001125, oT pletion Statements |. The term used to describe the party that is the subject of © bankuptey proceeding is 2 Gedta® ing cn involuntary bankuptcy peltion mus! be owed ot least pace amen * : y The only 63S for an involuntary bonkrptey fing by credits fs ee 4. The mojor categories of deb that ore given special poly under he Bonkwuptcy statutes ore a. ve §, The appointment of a instee £ Aclos of ctedtors hos accepted a plan ofreogorization it such pion his been accepted by creditors that hold at least in omount and in number of the allowed claims of such class of creditors. 7. Atrustee is authorized to void both ond _—_—_—_—_—_tronsters, |. Ina fquidation filing, if the court desires information that relates the activity of the trustee ‘with the book balances existing when the trustee was oppointed, then a statement of may be prepared Tiwe or False P 4 Credtors having secutt interests colaterozed by specific assets of a debtor in bankruptcy Fquidation are entiled to obtain satisfaction of their cloims from the free assets of the debtors estate. 10, Unsecured creditors whose claims ore to be poid in ful fom the assels of a debtor in bankruptcy fquidation before any cash i paid to other unsecured creditors ore classified os unsecured crecitors having preference. 11. Aselsin a statement of affcirs (financial statement) are assigned to one of thee categories: ‘ossels pledged for fuly secured lobilties, assets pledged for portaly secured libilties, and Diorty assets, 12 Insolvency in the bankavpicy sense isa financial status in which the agoregate curent fair ‘valve ofthe ossets of a business enterprise isnot sufcent to poy the enterprise's iabites. 18.The fing ofa debtors petition in barkruptey does not operate as on ord for ree by the baniruptey court. 14. Crecitors having prirty under the Bonisuptcy Low include creditors having security interests colateraized by specific asets of the debtor. 1S.In the accountability technique of accounting used by a fustee fora debtor in bankruptcy liquidation, there isno ledger account for owners equity: 16, Arairoad corporation may not fle a debtor’ petition for bankruptcy. 17. debtor in bankruptcy liquidation wil not be clscharged within sik. yeors of a previous anksuptey discharge. 18. Owners' equity amounts ore not displayed in a statement of affais (nancial stotemen') "The borivpy ‘cout has the opfan of cppcining eter a alee or an exariner in boonizuptcy reorganization. 20. Alstoctholdes ofc corporation undergoing bankuplcy rergorizaon must cpprove the lan of reorganization before it confimed by the bankruptcy cour.CHAPTERS Je Choice Questions hens “statement of affis” wed ‘a, Oniyiniquidations. Oniy in reorganization: 4. Inpreparing a statement None of fhe above. 2 ina statement of offi,” he b, Asels pledged with fuly secured creditors are shown only on the labilly side of thy “et . Licbites owed fo fuly secured creditors are shown only on the asset side of the statement. 4. lobies owed to portoly secured creditors cre shown on the osset sie of thy blonce shee! and as a deduction on the liability side of the statement. fe, None af the above. ‘tulnoslctement of fois,” ~~ a. libi dedi Assels pledged With fuly secured creditors are shown. on the liabity side of the statement and as a deduction on the asset side of the statement. ‘t. Uobilies owed to fully secured creditors are shown on the asset side of the statement ‘ond os « deduction on the liabilly side of the statement, d, iobites owed to partialy secured creditors are shown on the asset side of the bolance sheet and not as @ deduction on the liabilty side of the statement. e, None ofthe above, : 24. debtor fing’ a’ debtor's bankruptcy’‘petition will not be discharged if the, deblor hog received a pir discharge in bankruptcy within the past: @. Twoyeos’. - ae ' b. Fouryeos . ight years 2. Typicaly, the estimated amount available for short-term prepayments in statement of in iciol statement) is: _ | Current fair value * Carrying amount d. _netrealizable value 26.Willom Boulsta is starting a new business; Bautista: Enterprises, which will be singe proprietoship seling retail novelties. Bautista recently received a discharge in bankrupicy, but certain proved claims were unpaid because of insufficient funds. Which of the folowing ‘estilo loim against Bautista? a. The unpaid amounts owed to secured créditors who received less than the. full amount afer tesorting to their secur interest and receiving their bankruptcy cash payments ’b. The unpaid amounts owed to trade creditors for merchandise purchased and sold by ‘Boul in the ordinory course of his prior business enterprise ‘Apessonal loan to Bautista by his father made in an attempt fo avoid bankruptcy 27. Whats dened as ocondtion in which c compariys unable to meet debts as the debts moatuey oct S Rahoney b. Liability. a. it squeeze 28. What type of ledger account is the Estate Deficit account used in the trustee's accountng records fora debtor in bankruptcy liquidation?THEORIES Cc eee 1127 o Ame d._Reven 2 tam GREE c Emily 1B. Which of the folowing is fistranked of the unsecured lbiftes with piofty in bankruptcy hquidation® 9. Claims of governmental entities for various taxes or duties , Sdlaties, and commissions, subject to limitations of amount and fime d._ None ofthe foregoing ‘0. The accounting equation for a trustee in bankruptcy liquidations 0. Assets equal iabilties plus owner’ equity Sa ‘equal idbilties minus estate deficit 4. Assets minus labilties equals accountobilty 31. Nimious Company hos incured large net losses forthe post two years, Because ofits nabity topay curent labilies, Nimbus has led « petition for reorganization under the Bankruptcy Low. The reorganization provisions of he Bonkzuptcy Law: @._Requie that the bankruptcy cout appcint a trustee in all cases | leptin oer ply only fo creditors bankruptcy petons d. Wil apply to Nimbus only if Nimbus is required fo register with the Securities and Exchange Comrrission pursuant fo the Philppine secutis laws 32. In the joumal entry to open the accounting records of a trustee in a Chapter 7 bankruptcy liquidation, the debit to the Estate Deficit ledger accounts in the. statement of cffais ‘amount of the: ,, Total estimated amount available . Estimated omount available for unsecured, non-priofty crecitors d. Stockholders’ equity of the debtor corporation = 33.Under the Bankruptcy Code, do creditors having priofty include? Pottally Secured Specified Unsecured Creditors = Creditors a. Yes Yes b Yes ‘No ee , Overdrawn iquidating . 44. Toast the fustee, a debtor must 4. collect and reduce fo money any non-exernpt property ‘fle progres reports withthe court» .pHEORIES ing [gui ostatement ol fis, conising of nawars osteo qusfos regarding deblors financial condition pay dividends to creditors with regards to priotes Aisen ol he folowing statements wet erin debis ore not dischargeable, EE goa! of iquidation is to give the company a new stort c. Alsecuted cloims ore paid in ful 4d. The expenses fo odminister the estate are paid lost becouse they are unsecured. ‘aWhich ofthe folowing does not describe the accounting statement of altars? ine emphasis on asset net realizable vale, not hstovical cost he statement of atfaiss concemed only with the assets ofthe deblor axgarizotion, not he cloims <, the statement can olso be used in a reorgorization d. the statement of affais is based on estimated valves; actual realized values may be diferent _p.Tne document used to estimate omounts avaiable fo each clas of cloimsis called a{n} ‘0, Statement of Assets ond Liobites. ». Legal Statement of Affairs. ‘Accounting Statement of Affais, {- Stolement of Realization and Liquidation, ‘0. he document used by a trustee to report perodicily on the status of fiduciary activities is called a{n} a. Statement of Assets ond Liobilties, ». Legol Statement of Affi. ¢. Accounting Statement of Affais. statement of Realization and Liquidation. Si.Atter elrrinating the deficit in a’ reorganization plan, a balance: may remain in Reorganization Capital. On the balance sheet, where would this account appear? | a of the Paid-n Capital i it of the dated balance in Retained Earrings, . an Intangible Asset i the balance isa debit 4, adefered credit amortized over a period not fo exceed 40 yeors ‘ £2. he ralio called “dividend to general unsecured creditors colculated by. which of the following formulas? ' ‘©. Estimated amount avoilable for unsecured creditors with/without priority civided by Total Claims of all unsecured creditors with/without priority —» b, Estimated realizable valve ofall debtor assets divided by Book valve of debi assets ¢. Esimated aain/oss on Iquidtion divided by Total estimated net realzable valve of debtor assets. 7 Net esimated proceeds ovalable fo unsecured credits divided DyTotal cls of unsecured creditors '3.In the accounting statement of affairs, the gains or loses upon liquidation would equal 4. net book value of assets minus book value of fabiltes he book valve of assets minus their realizable valve, otal estimated realzable value of assets minus the amount asigned to secured * creditors. 4, total estimated realzable valve of assets minus the amount remaining for unsecured creditors, 54. A corporations accounting statement of affais shows o dividend of “aK. The didend ‘means that Or al creas and stockholders wl receive cpproxmatey 40% ofthe book va of het respective interests 4. ‘Aabeneed Pianncied Aeveuntion ~ A Commechensien: Coneantual & Pretedaal AnaventhiAIS Pam ooo ng cthate = wil eceve on amount approximately equal to 40% of the Book vas 4 a tors: of ot but stockholders will receive nothing, tne Tgusecred co wl receive 407 of the book value oftheir espective clin Ces execred cloims wil receive 40% of the book value of theit respective clin, Ee jens accounting sotement of affois shows © dividend of 115%. The dian A hat , ee jcredios wileceive cn cmount in excess of the book value of the'r claims, a. S00 ed cet wil receive an amount in excess of the book valve of the clang. b veel 0) expect some return on their interests. : (e Beesmesinte peparion che sttement : gedene! sf Rolzoon ond Uquiation cites from the Statement of Allis becouse sft of Reolzation and Affis repors estimated realizable valves ralher tg, ucliquatin ess : jotement ofRealzation and Affaisis a summary of secured debt activity ony » Tesla! of Realzaion ond Aff i prepored only a final completion o ig fuidaton process ‘. A 5 Silamen of Realzation and Affairs reports actual liquidation resuits rather tho, (rte ecole values : site ren obusness becomes insolvent, it genetally has three possible courses of action, Wii 51 ve teevng sno! one ofthe three possble courses of action? Te deblorandiis creditors may enter info a contractual agreement, outside of fom barlployproceedings. deborconiues operating the business in the normal course of the day today rors. A , The deter or is creditors may fle | bankruptcy petition, after which the debris iuialed 4. Thedeblororts creciors may fle a petition for reorganization. '8,A conpoien ogreement s on dgreement between the debtor and its ctecitors whereby hhecredtasogee to: se piles thon the ful amount oftheir cidims. sateen of the claim uni a later date. ¢.. ce he debtor into a liquidation, 4. occueileres of ahigher ate. 58, Adeblormay le which type of petition when deeking judicial protection under the YerinptcyLawe Lolntary Involuntary uy c. Either or ll Tey +d Neither or The duis ofthe tustee include: ©. oppointing creditors’ committees in liquidation cases. approving al payments for debs ncured before the bankruptcy fling. iting ccs and dsalowing any that are improper. ngameeing ofthe debtor's creditors. >