Chap hapt er 17 Test Test Bank ank CORPOR PORATE LI QUI DATI ONS, REOR EORGANI ANI ZA ZATI TI ONS, AND AND DEBT RESTRUC ESTRUCTUR TURI NGS FO F OR FI NANC ANCI ALL ALLY Y DI STRESSED CORPOR PORATI ONS Mul t i pl e Ch Choi ce Quest i ons LO1 1.
When t he bankr upt cy cou cour t gr gr ant ant s an order order f or r el i ef a. cr edi t or s may no not see seek pa payment f or t hei r cl ai ms di di r ect l y f r om t he de debt or cor cor por at i on. b. t he r eor eor gani ani zat i on pl an was accep ccept ed by cr edi t or s h hav avii ng at l east one- hal f of t he t ot al number of cl ai ms and and t he cl cl ai ms r epr esen sent at l east t wo- t hi r ds of of t he t ot al amount owed. c. t he bankr upt cy cou cour t con conf i r ms t hat t he r eor gani zat i on pl an i s f ai r a nd nd equi t abl e t o c r ed edi t or s . d. t he cou cour t di scha schar ges t he de debt or exce xcept f or t hose cl ai ms pr ovi ded f or i n t he r eor gani zat zat i on pl an.
LO1 2.
Whi ch of t he f ol l owi ng must app appr ove ove a Chapt apt er 11 11 pl an? an? a. b. c. d.
LO1 3.
or or gani ani zat i on’ on’ s manag anagem ement ent . assi gned t r ust ee. ent i t y’ s st st ockh ckhol der s. cou cour t and t he cr edi t or s.
When hen t he accoun account i ng equ equat i on of a cor por at i on comput es a negat i ve ow owner sh shii p posi t i on, becau cause l i abi l i t i es are gr gr eat er t han as se set s , t he f i r m i s a. b. c. d.
LO1 4.
The The The The The
a di st r essed ssed cor cor por at i on. a bankr upt cor cor por at i on. i nsol sol vent i n t he equi t y se sense. se. i nsol sol ven vent i n t he bankr upt cy sen sense.
A bankrup krupt cy pet i t i on f i l ed by a f i r m’ s credi credi t or s i s a. b. c. d.
a Chapt er 7 pet i t i on. a pet i t i on f or l i qui dat i on. an i nvol unt ar y pet i t i on. a vol unt ar y pet i t i on.
©2009 Pea Pear son Educat cat i on, on, I nc. publ i shi shi ng as Pr ent i ce Hal l 1717- 1
LO1 5.
The dut i es of a debt or i n possessi on i n a Chapt er 11 bankr upt cy case do not i ncl ude a.
f i l i ng a l i st of credi t or s and schedul es of asset s and l i abi l i t i es wi t h t he bankr upt c y c our t . b. oper at i ng t he busi ness dur i ng t he r eor gani zat i on per i od. c. f i l i ng a r e or gani z at i on pl an. d. sur r ender i ng al l pr oper t y t o t he t r ust ee. LO1 6.
Li abi l i t i es i ncur r ed af t er ent er i ng Chapt er 11 a. can onl y occur af t er secur ed cr edi t or s ar e pai d. b. must be appr oved by cr edi t ors ’ commi t t ees i n l i qui dat i on cases. c. must be appr oved by t r ust ees. d. must be pr eappr oved by t he bankr upt cy cour t .
LO1 7.
I n a t r oubl ed debt r est r uct ur i ng i nvol vi ng a modi f i cat i on of t er ms, t he debt or ’ s gai n on r est r uct ur i ng a. b. c. d.
LO1 8.
wi l l wi l l may may
equal equal or may or may
t he t he not not
c r edi t or ’ s gai n on r es t r uc t ur i ng. c r edi t or ’ s l os s on r es t r uc t ur i ng. equal t he cr edi t or ’ s gai n on r est r uct ur i ng. equal t he cr edi t or ’ s l oss on r est r uct ur i ng.
A s i ngl e c r edi t or a. can never f i l e a pet i t i on f or bankr upt cy. b. wi t h a $10, 000 or mor e secur ed cl ai m may f i l e a pet i t i on f or bankrupt cy. c. wi t h a $10, 000 or mor e unsecur ed cl ai m may f i l e a pet i t i on f or bankr upt cy, i f t her e are f ewer t han 12 unsecur ed cr edi t or s . d. wi t h a $10, 000 or mor e unsecur ed cl ai m may f i l e a pet i t i on f or bankr upt cy i f t her e ar e mor e t han 12 unsecur ed cr edi t or s .
LO1 9.
A case agai nst a cor por at e debt or a. can be f i l ed onl y under Chapt er 7. b. can be f i l ed onl y under Chapt er 11. c. * can be f i l ed ei t her under Chapt er 7 or Chapt er 11. d. wi l l be det er mi ned by t he t r ust ee whet her i s shal l Chapt er 7 or Chapt er 11. ©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 2
be
LO1 10.
A pr i mary di f f er ence bet ween bankrupt cy pet i t i ons i s t hat
vol unt ary
and
i nvol unt ar y
a. c r edi t or s f i l e t he pet i t i on i n an i nvol unt ar y f i l i ng. b. t r ust ees ar e not used i n an vol unt ar y f i l i ng. c. vol unt ar y pet i t i ons ar e not subj ect t o r evi ew by t he bankr upt cy cour t . d. t he debt or cor por at i on f i l es t he pet i t i on i n an i nvol unt ar y f i l i ng. LO1 11.
Cr edi t or commi t t ees are el ect ed a. i n al l bankrupt cy cases. b. i n Chapt er 7 cases. c . onl y in bankr upt c y c as es pet i t i ons . d. i n Chapt er 11 cases.
LO2 12.
ar i s i ng
f r om
i nvol unt ar y
The f i r s t - t o- l as t r anki ng or der of pr i or i t y of t he f ol l owi ng: I I I I
. st ockhol der cl ai ms I . uns ec ur ed pr i or i t y cl ai ms I I . s ec ur ed c l ai ms I . unsecur ed nonpr i or i t y cl ai ms
i n a Chapt er 7 bankr upt cy case i s a. b. c. d. LO2 13.
I I I I
, I I , I V, and I I I , I I , I V and I I , I , I V, and I , I V, I I I , and
I I I I
I. . I. .
I n t ypi cal t r ust ee account i ng a. gai ns and l osses on t he sal e of asset s ar e charged t o t he est at e equi t y account . b. unr ecor ded l i abi l i t i es di scover ed by t he t r ust ee are cr edi t ed t o t he est at e equi t y account and cr edi t ed t o t he l i abi l i t y account . c. l i qui dat i on expenses ar e char ged t o t he est at e equi t y account . d. al l of t he above pr ocedur es ar e t ypi cal f or t r ust ee account i ng.
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 3
LO2 14.
Tr ust ees i n a bankr upt cy cases have t he dut y t o a. b. c. d.
LO3 15.
I f a debt or has mat er i al gai ns t hese gai ns wi l l be r epor t ed as a. b. c. d.
LO3 16.
debt
r est r uct ur i ngs,
oper at i ng gai ns of t he debt or . ot her non- oper at i ng gai ns of t he debt or . ext r aor di nar y gai ns of t he debt or . di scont i nued oper at i ons.
l ower of cost or mar ket val ue of t he not e r ecei vabl e. book val ue of t he t r ansf er r ed asset s. f ai r mar ket val ue of t he not e r ecei vabl e. f ai r mar ket val ue of t he t r ansf er r ed asset s.
A j udge woul d per mi t a debt or - i n- possessi on i n a a. b. c. d.
LO4 18.
on i t s
A credi t or wi l l r ecor d asset s t r ansf er r ed i n f ul l sett l ement of a not e recei vabl e at t he a. b. c. d.
LO3 17.
nul l i f y af f i l i at e t r ansact i ons . r el egat e t ax payment s t o an unsecur ed st at us. cal l credi t or meet i ngs on l i qui dat i on pr oceedi ngs. pr ovi de payment s t o cr edi t or s and cust omers .
case wi t h onl y secur ed cr edi t or s. Chapt er 7 case. Chapt er 11 case. vol unt ar y case.
Under t he AI CPA’ s SOP 90-7 , a r eor gani zed company must meet a “r eor gani zat i on val ue t est ” as one of t he t wo condi t i ons necessary f or f r esh st ar t account i ng. Reor gani zat i on val ue appr oxi mat es t he a. b. c. d.
f ai r f ai r book None
v al val val of
ue of t he ue of t he ue of t he t he above
ent i t y’ s t ot al as set s . ent i t y’ s net as s et s . ent i t y’ s net asset s. choi ces ar e cor r ect .
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LO4 19.
Under t he AI CPA’ s SOP 90-7 , “ pr epet i t i on l i abi l i t i es s ubj ect t o compr omi se” ar e l i abi l i t i es i ncur r ed bef or e t he Chapt er 11 f i l i ng and ar e c l as s i f i ed as a. b. c. d.
LO4 20.
r es i dual c l ai ms . cont i ngent cl ai ms. cur r ent oper at i ng cl ai ms. unsecur ed and under secur ed cl ai ms.
Whi ch of t he f ol l owi ng st at ement s i s cor r ect concer ni ng compani es emer gi ng f r om r eor gani zat i on under Chapt er 11 when t hey do not qual i f y f or f r esh st ar t account i ng? a. The f or gi veness of debt i s r epor t ed as an oper at i ng gai n. b. Quasi - r eor gani zat i on account i ng i s used. c. The f or gi veness of debt i s r epor t ed as an ext r aor di nar y i t em. d. The f or gi veness of debt i s r epor t ed as an i ncr ease i n c ont r i but ed c api t al .
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LO2 Exer ci se 1 Ar cher y Cor por at i on i s l i qui dat i ng under Chapt er 7 of t he Bankr upt cy Act . The account s of Ar chery at t he t i me of f i l i ng ar e summar i zed as f ol l ows :
Cash Account s r ecei vabl e- net I nvent or y Equi pment - net L and Bui l di ng- net Goodwi l l
$
$ Account s payabl e Wages and sal ar i es Cont r i but i ons due t o pensi on pl an Taxes payabl e Accr ued i nt er est payabl e ( i ncl udes $10, 000 f r om t he mor t gage payabl e and $2, 000 f r om t he not e payabl e) Not e payabl e Mor t gage payabl e Capi t al s t oc k Def i ci t
$
( $
Book Val ue 10, 000 $ 60, 000 110, 000 70, 000 20, 000 200, 000 42, 000 512, 000
Est i mat ed Real i zabl e Val ue 10, 000 50, 000 70, 000 70, 000 40, 000 150, 000
120, 000 30, 000 20, 000 80, 000 12, 000 100, 000 100, 000 70, 000 20, 000 ) 512, 000
The l and and bui l di ng ar e pl edged as secur i t y f or t he mor t gage payabl e as wel l as any accr ued i nt er est on t he mor t gage. The not e payabl e i s secur ed wi t h t he equi pment , but t he i nt er est on t he not e i s unsecur ed. Wages and sal ar i es wer e accr ued wi t hi n t he l ast 90 days and pensi on pl an cont r i but i ons were accr ued wi t hi n t he l ast 6 mont hs; nei t her exceeds $4, 000 per empl oyee. Li qui dat i on expenses ar e expect ed t o be $50, 000. Requi r ed: 1. Pr epar e a schedul e showi ng t he cr edi t or s and t he expect ed payout s.
pr i or i t y
r anki ngs
of
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t he
2. Banyo Cor por at i on was a suppl i er t o Ar cher y Cor por at i on and at t he t i me of Ar cher y’ s bankr upt cy f i l i ng, Banyo’ s account r ecei vabl e f r om Ar cher y was $40, 000. On t he basi s of t he est i mat es, how much can Banyo expect t o r ecei ve? LO2 Exer ci se 2 Hi nsch Company i s i n bankr upt cy and i s bei ng l i qui dat ed under t he pr ovi si ons of Chapt er 7 of t he bankr upt cy code. The t r ust ee has conver t ed al l asset s i nt o $120, 000 cash and has pr epar ed t he f ol l owi ng l i st of appr oved cl ai ms: Cust omer deposi t s ( $1, 000 f r om each of t wo cust omer s t hat order ed pr oduct s t hat wer e never del i ver ed)
$
Pr oper t y t axes payabl e Account s payabl e, unsecur ed Tr ust ee’ s f ees and ot her cos t s of l i qui dat i on
2, 000 4, 000 30, 000 16, 000
Mor t gage payabl e, secur ed by pr oper t y t hat was sol d f or $80, 000
60, 000
Not e payabl e t o bank, secur ed by al l account s r ecei vabl e of whi ch $30, 000 wer e col l ect ed and $10, 000 wer e wr i t t en of f as uncol l ect i bl e
30, 000
Requi r ed How much wi l l t he bank r ecei ve on t he not e payabl e? LO2 Exer ci se 3 I ngham Cor por at i on i s bei ng l i qui dat ed under Chapt er 7 of t he Bankr upt cy Act . The t r ust ee has det er mi ned t hat t he unsecur ed cl ai ms wi l l r ecei ve $. 30 on t he dol l ar . Pl at i num Cor por at i on hol ds a $35, 000 mor t gage not e r ecei vabl e f r om I ngham t hat i s secur ed by equi pment wi t h a $17, 500 book val ue and a $7, 000 f ai r val ue. Requi r ed: How much of t he mor t gage r ecei vabl e wi l l be r ecover ed by Pl at i num?
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LO2* & Exer ci se 4 Buckl ey Cor por at i on i ncur r ed maj or l osses i n 2005 and ent ered i nt o vol unt ar y Chapt er 7 bankr upt cy i n t he ear l y par t of 2006. By J ul y 1, al l asset s wer e conver t ed i nt o cash, t he secur ed cr edi t or s wer e pai d, and $74, 000 i n cash was l ef t t o pay t he r emai ni ng cl ai ms as f ol l ows: Account s payabl e Cl ai ms pr i or t o t he t r ust ee’ s appoi nt ment Pr oper t y t axes payabl e Wages payabl e ( al l under $4, 000 per empl oyee) Unsecur ed not e payabl e Accr ued i nt erest on t he not e payabl e Admi ni st r at i ve expenses of t he t r ust ee Tot al
$
$
22, 000 4, 000 7, 500 21, 000 28, 000 3, 000 15, 000 100, 500
Requi r ed: Cl assi f y t he cl ai ms by t hei r Chapt er 7 pr i or i t y r anki ng, and anal yze whi ch amount s wi l l be pai d and whi ch amount s wi l l be wr i t t en of f . LO2 Exer ci se 5 J ones Cor por at i on i s bei ng l i qui dat ed under Chapt er 7 of t he Bankr upt cy Act . The t r ust ee has det er mi ned t hat t he unsecur ed cl ai ms wi l l r ecei ve $. 50 on t he dol l ar . Kevi n Cor por at i on hol ds a $200, 000 mor t gage not e r ecei vabl e f r om J ones t hat i s secur ed by mar ket abl e secur i t i es wi t h a $150, 000 book val ue and a $164, 000 f ai r val ue. Requi r ed: How much of t he mor t gage r ecei vabl e wi l l Kevi n r ecover ? LO2 Exer ci se 6 Kr est a Cor por at i on i s bei ng l i qui dat ed under Chapt er 7 of t he Bankr upt cy Act . The t r ust ee has det er mi ned t hat t he unsecur ed cl ai ms wi l l r ecei ve $. 25 on t he dol l ar . Loanst ar Cor por at i on hol ds an $80, 000 mor t gage not e r ecei vabl e f r om Kr est a t hat i s secur ed by mar ket abl e secur i t i es wi t h an $88, 000 book val ue and a $60, 000 f ai r val ue. Requi r ed: How much of t he mor t gage r ecei vabl e wi l l Loanst ar r ecover ? ©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 8
LO3 Exer ci se 7 On December 31, 2005, Gol dcoast bank agr eed t o r est r uct ur e an $800, 000, 10% l oan r ecei vabl e f r om Fi el di ng Cor por at i on because of Fi el di ng’ s f i nanci al pr obl ems. The l oan was i ssued at par and at December 31, t her e was $40, 000 of accr ued i nt er est f or a si x- mont h per i od. Ter ms of t he rest r uct ur i ng agr eement ar e as f ol l ows: ** Reduce t he l oan f r om $800, 000 t o $600, 000; ** Ext end t he mat ur i t y dat e by 2 year s f r om December 31, 2005 t o December 31, 2007; and, ** Reduce t he i nt er est r at e on t he l oan f r om 10% t o 6%. Pr esent val ue assumpt i ons: Pr esent Pr esent Pr esent Pr esent
val val val val
ue ue ue ue
of of of of
$1 $1 an an
f or 2 year s at 6% = f or 2 year s at 10% = annui t y of $1 f or 2 year s at 6% = annui t y of $1 f or 2 year s at 10% =
0. 8900 0. 8264 1. 8334 1. 7355
Requi r ed: 1. What amount of gai n or l oss f r om r est r uct ur i ng t he l oan wi l l Fi el di ng r epor t f or 2005? 2. Comput e t he gai n or l oss t hat wi l l be r eport ed by Gol dcoast Bank. Ass ume t hat t he bank has not r ecogni zed an i mpai r ment bef or e t he r est r uct ur i ng. LO3 Exer ci se 8 Logan Cor por at i on owes Mango Fi nance Company $825, 000 pl us $53, 750 of accr ued i nt er est . Logan has a cash f l ow short age and ar r anges f or an equi t y set t l ement of t he l oan wi t h Mango by i ssui ng 55, 000 shares of i t s $1. 00 par val ue common st ock t o Mango on Apr i l 1, 2006. Logan common st ock has a mar ket val ue of $13. 75 per shar e on Apr i l 1. Requi r ed: Prepar e Logan' s r es t r uct ur i ng.
j our nal
ent r y
to
recor d
t he
t r oubl ed
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 9
debt
LO3 Exer ci se 9 Mat r i x Cor por at i on owes Nor man Fi nance Company $750, 000 on a not e payabl e pl us $37, 500 of accr ued i nt er est . Mat r i x has a cash f l ow short age and negot i at es a debt r est r uct ur i ng wi t h Norman by i ssui ng 60, 000 shar es of i t s $1. 00 par val ue common st ock t o Nor man on J anuar y 1, 2006. Mat r i x' s common st ock has a mar ket val ue of $10. 10 per shar e on J anuar y 1st . Requi r ed: Pr epar e Mat r i x' s r es t r uct ur i ng.
j our nal
ent r y
to
recor d
t he
t r oubl ed
debt
LO3 Exer ci se 10 On December 31, 2006, Gal vi n Bank agr eed t o r est r uct ur e a $900, 000, 10% l oan r ecei vabl e f r om Hi nes Cor por at i on because of Hi nes’ f i nanci al pr obl ems. The debt was i ss ued at par and at December 31, t here was accr ued i nt er est of $60, 000 f or si x mont hs. Ter ms of t he r est r uct ur i ng agr eement ar e as f ol l ows: ** Reduce t he l oan f r om $900, 000 t o $600, 000; ** Ext end t he mat ur i t y dat e of t he l oan by 2 year s f r om December 31, 2006 t o December 31, 2008; and, ** Reduce t he i nt er est r at e f r om 10% t o 8%. Pr esent val ue assumpt i ons: Pr esent Pr esent Pr esent Pr esent
val val val val
ue ue ue ue
of of of of
$1 $1 an an
f or 2 year s at 8% = f or 2 year s at 10% = annui t y of $1 f or 2 year s at 8% = annui t y of $1 f or 2 year s at 10% =
0. 8573 0. 8264 1. 7833 1. 7355
Requi r ed: 1. What amount of gai n or Hi nes r epor t f or 2006?
l oss f r om r est r uct ur i ng t he l oan wi l l
2. Comput e t he gai n or l oss t hat wi l l be report ed by Gal vi n Bank. Ass ume t hat t he bank has not r ecogni zed an i mpai r ment bef or e t he r e st r uc t ur i ng.
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 10
SOLUTI ONS Mul t i pl e Choi ce Quest i ons 1.
a
2.
d
3.
d
4.
c
5.
d
6.
d
7.
d
8.
c
9.
c
10.
a
11.
b
12.
b
13.
d
14.
d
15.
c
16.
d
17.
b
18.
a
19.
d
20.
c
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 11
Exer ci se 1 Requi r ement 1
Amount of Cl ai m
Expect ed Payment
Est i mat ed avai l abl e cash Secur ed cl ai ms: Mor t gage payabl e & i nt er est
$
Par t i al l y secur ed cl ai ms: Not e payabl e ( $30, 000 r ecl assi f i ed as unsecur ed) Unsecur ed pr i or i t y cl ai ms: Est i mat ed l i qui dat i on expens es Wages and sal ar i es Pensi on f und l i abi l i t y Taxes payabl e Unsecur ed nonpr i or i t y cl ai ms: Account s payabl e Unsecur ed port i on of not e payabl e Accr ued i nt erest on not e payabl e
$
110, 000 $
Est i mat ed Remai ni ng Cash $ 390, 000
110, 000 $
280, 000
100, 000
70, 000
210, 000
50, 000 30, 000 20, 000 80, 000
50, 000 30, 000 20, 000 80, 000
160, 000 130, 000 110, 000 30, 000
120, 000 30, 000 2, 000
0
Expect ed r et ur n on t he dol l ar f or unsecur ed nonpr i or i t y cl ai ms: $30, 000/ $150, 000 = $. 20 on t he dol l ar Requi r ement 2 Banyo’ s est i mat ed r et ur n: $40, 000 cl ai m x $. 20 = $8, 000
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Exer ci se 2 Cash Mor t gage payabl e, pai d i n f ul l Not e payabl e t o bank, secur ed por t i on Pr i or i t y cl ai ms ( $16, 000 of admi ni st r at i ve cost s + $2, 000 of cust omer deposi t s + $4, 000 pr oper t y t ax) Avai l abl e f or unsecur ed nonpr i or i t y cl ai ms
Unsecur ed, nonpr i or i t y cl ai ms: Unsecur ed port i on of not e payabl e t o bank Account s payabl e Tot al unsecur ed, nonpr i or i t y cl ai ms
$ ( (
( $
$
120, 000 60, 000 ) 60, 000 30, 000 ) 30, 000 22, 000 ) 8, 000
$
10, 000 30, 000 40, 000
$
32, 000
$ $
35, 000 7, 000 ) 28, 000
$
7, 000
$
8, 400 15, 400
$8, 000 cash/ $40, 000 cl ai ms = $. 20 on t he dol l ar Amount pai d t o bank: $30, 000 f or secur ed port i on + ( $10, 000 x . 20) unsecur ed por t i on =
f or
Exer ci se 3 Mor t gage not e r ecei vabl e Less: Por t i on secur ed by equi pment Unsecur ed por t i on Est i mat ed r ecover y on secur ed por t i on Est i mat ed r ecover y on unsecur ed por t i on ( $28, 000 x $. 30) = Recover y on mor t gage not e r ecei vabl e
(
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 13
Exer ci se 4 Requi r ement 1 Unsecur ed pr i or i t y cl ai ms:
Admi ni st r at i ve expenses
$
Cl ai ms pr i or t o t he t r ust ee’ s appoi nt ment Wages payabl e Proper t y t axes payabl e
Unsecur ed Nonpr i or i t y Cl ai ms:
Account s payabl e Unsecur ed not e Accrued i nt er est on t he not e
Cl ai m Amount 15, 000 $
Cash Left 59, 000
$
4, 000
4, 000
55, 000
21, 000
21, 000
34, 000
7, 500
7, 500
26, 500
Cl ai m Amount $
To be Pai d 15, 000
To be Pai d
Wr i t t en Of f
22, 000 $
11, 660 * $
10, 340
28, 000
14, 840 **
13, 160
3, 000
0
3, 000
$26, 500/ ( $22, 000 + $28, 000) = 53% * $22, 000 x 53% = $11, 660 * *$28, 000 x 53% = $14, 840 Exer ci se 5 Mor t gage not e r ecei vabl e Less: Por t i on secur ed by mar ket abl e secur i t i es Unsecur ed por t i on Est i mat ed r ecover y on secur ed por t i on Est i mat ed r ecover y on unsecur ed por t i on ( $36, 000 x $. 50) = Recover y on mor t gage not e r ecei vabl e
$ $
200, 000 164, 000 ) 36, 000
$
164, 000
$
18, 000 182, 000
(
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 14
Exer ci se 6 Mor t gage not e r ecei vabl e Less: Por t i on secur ed by mar ket abl e secur i t i es Unsecur ed por t i on Est i mat ed r ecover y on secur ed por t i on Est i mat ed r ecover y on unsecur ed por t i on ( 20, 000 x $. 25) = Recover y on mor t gage not e r ecei vabl e
$ $
80, 000 60, 000 ) 20, 000
$
60, 000
$
5, 000 65, 000
(
Exer ci se 7 Requi r ement 1 Fi el di ng’ s gai n on r es t r uc t ur i ng: Car r yi ng val ue of t he debt ( $800, 000 + $40, 000 accr ued i nt er est ) Tot al f ut ur e cas h f l ows ( $600, 000 + $72, 000 i nt er est ) Gai n on r est r uct ur i ng
$
840, 000 (
$
672, 000 ) 168, 000
Requi r ement 2 Gol dcoast Bank’ s l oss on r est r uct ur i ng: Car r yi ng val ue of t he l oan bef or e r est r uct ur i ng $ Pr esent val ue of $600, 000 due i n 2 year s at 10% hi st or i cal r at e: $600, 000 x . 8264 = $495, 840 Present val ue of $36, 000 i nt er est f or 2 year s at 10% hi st or i cal r at e = $36, 000 x 1. 7355 = 62, 478 Car r yi ng val ue of t he l oan $558, 318 (
840, 000
Loss on r est r uct ur i ng
281, 682
$
558, 318 )
Exer ci se 8 Not e payabl e Accr ued i nt er est Common st ock, Capi t al pai d i Ext r aor di nar y
payabl e $10 par n excess of par gai n on r est r uct ur i ng
825, 000 53, 750 55, 000 756, 250 67, 500
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 15
Exer ci se 9 Not e payabl e Accr ued i nt er est Common st ock, Capi t al pai d i Ext r aor di nar y
payabl e $1 par n excess of par gai n on r est r uct ur i ng
750, 000 37, 500 40, 000 546, 000 201, 500
Exer ci se 10 Requi r ement 1 Hi nes’ gai n on r est r uct ur i ng: Car r yi ng val ue of t he debt ( $900, 000 + $60, 000 accr ued i nt er est ) Tot al f ut ur e cas h f l ows ( $600, 000 + $96, 000 i nt er est ) Gai n on r est r uct ur i ng
$
960, 000 (
$
696, 000 ) 264, 000
Requi r ement 2 Gal vi n’ s l oss on r est r uct ur i ng: Car r yi ng val ue of t he l oan bef or e r est r uct ur i ng $ Pr esent val ue of $600, 000 due i n 2 year s at 10% hi st or i cal r at e: $600, 000 x . 8264 = $495, 840 Present val ue of $48, 000 i nt er est f or 2 year s at 10% hi st or i cal r at e = $48, 000 x 1. 7355 = 83, 304 Car r yi ng val ue of t he l oan $579, 144 (
960, 000
Loss on r est r uct ur i ng
380, 856
$
579, 144 )
©2009 Pear son Educat i on, I nc. publ i shi ng as Pr ent i ce Hal l 17- 16
