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Unformatted text preview: Chapter 13 - Accounting for Legal Reorganizations and Liquidations Chapter 13 Accounting for Legal Reorganizations and Liquidations Multiple Choice Questions 1. A Chapter 7 bankruptcy is a(n) A. involuntary reorganization. B. bankruptcy forced by a company's creditors. C. liquidation. D. bankruptcy in which all creditors receive payment in full. E. voluntary reorganization. 2. Where should a company undergoing reorganization report the gains and losses resulting from the reorganization? A. On the statement of retained earnings. B. On the income statement, combined with the gains and losses from operations. C. On the statement of stockholders' equity. D. On the income statement, separate from other gains and losses. E. On the statement of cash flows. 3. Lawyer's fees incurred during a reorganization are accounted for as: A. an expense. B. an intangible asset, Reorganization Cost, which would normally be amortized over a five- year period. C. additional paid-in capital. D. retained earnings. E. a prepaid asset until the entity emerges from reorganization. 4. On its balance sheet, a company undergoing reorganization should A. report its assets at fair value, so that financial statement users can estimate whether creditors' claims will be met. B. report its assets at net realizable value because there is reason to doubt that the organization is a going concern. C. report its assets as pledged or free. D. report its assets at current replacement cost. E. continue to report its assets at book value. 13-1 Chapter 13 - Accounting for Legal Reorganizations and Liquidations 5. How should the fresh start reorganization value normally be determined? A. As the sum of current replacement cost of the company's assets. B. By discounting future cash flows for the entity that will emerge. C. As the sum of the historical cost of net assets. D. As the sum of the net realizable value of identifiable assets. E. By adjusting current cash flows for the entity as it emerges from reorganization. 6. How should liabilities (except for deferred income taxes) be reported by a company using fresh start accounting ? A. At the undiscounted sum of future cash payments. B. At book value prior to the reorganization. C. As partially secured liabilities. D. At the present value of future cash payments. E. As unsecured liabilities. 7. Which one of the following is a requirement that must be met before an involuntary bankruptcy petition can be filed when there are at least 12 unsecured creditors? A. The petition must be filed by all creditor(s) to whom the debtor owes at least $13,475. B. The petition must be signed by creditor(s) with unsecured debts of at least $5,000. C. The petition must be signed by a majority of the creditor(s)....
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This note was uploaded on 09/28/2011 for the course ACC 431 taught by Professor Talbert during the Spring '08 term at National.
- Spring '08