Question 6, P1-1 (book/static) Part 1 of 3 Liability comparisons John Bailey invested $50,000 in The Entertainment Company seven years ago. He is concerned about the future of the firm, as the profits have plummeted over the last four years. The firm has $120,000 in outstanding debt and is considering declaring bankruptcy. Describe the finan implication of the firm going bankrupt in each of the following situations. a. The Entertainment Company is a sole proprietorship owned by John Bailey. b. The Entertainment Company is an equal partnership of John Bailey and his brother, Peter. c. The Entertainment Company is a corporation. a. If The Entertainment Company is a sole proprietorship owned by John Bailey O A. John Bailey has limited liability, which is the amount of $120,000 in unpaid debts. OB. John Bailey has unlimited liability, which means creditors can only claim against the $50,000 he invested. Oc. John Bailey has limited liability, which guarantees that he cannot lose more than the $50,000 he invested. OD. John Bailey has unlimited liability, which means creditors can claim against his personal assets and will be held personally liable for the $120,000 in outstanding debt.

Question 6, P1-1 (book/static) Part 1 of 3 Liability comparisons John Bailey invested $50,000 in The Entertainment Company seven years ago. He is concerned about the future of the firm, as the profits have plummeted over the last four years. The firm has $120,000 in outstanding debt and is considering declaring bankruptcy. Describe the finan implication of the firm going bankrupt in each of the following situations. a. The Entertainment Company is a sole proprietorship owned by John Bailey. b. The Entertainment Company is an equal partnership of John Bailey and his brother, Peter. c. The Entertainment Company is a corporation. a. If The Entertainment Company is a sole proprietorship owned by John Bailey O A. John Bailey has limited liability, which is the amount of $120,000 in unpaid debts. OB. John Bailey has unlimited liability, which means creditors can only claim against the $50,000 he invested. Oc. John Bailey has limited liability, which guarantees that he cannot lose more than the $50,000 he invested. OD. John Bailey has unlimited liability, which means creditors can claim against his personal assets and will be held personally liable for the $120,000 in outstanding debt.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter6: Building And Maintaining Good Credit

Section: Chapter Questions

Problem 7FPC

See similar textbooks

Similar questions

4. Baguio Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Baguio company has a P2,000,000 note payable to First Bank. The bank is considering two alternatives. 1. Acceptance of land owned by Baguio company valued at P1,600,000 and carried at its historical cost of P1,120,000. 2. Acceptance of an equity interest in Baguio company in the form of 16,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share. Under the first alternative, what is the amount of gain/(loss) on extinguishment of debt?
13-19 aguio Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Baguio company has a P2,000,000 note payable to First Bank. The bank is considering two alternatives. 1. Acceptance of land owned by Baguio company valued at P1,600,000 and carried at its historical cost of P1,120,000. 2. Acceptance of an equity interest in Baguio company in the form of 16,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share. Using the data above, under the second alternative, what is the amount of gain/(loss) on extinguishment of debt?
Blossom Political Consultants management has decided to discontinue all of the firm's business operations. The firm has total debt of $5.90 million, and the liquidation value of its assets is $11.00 million. If the book value of the firm's equity is $5.50 million, then what will be the amount of the liquidating dividend when the firm liquidates all of its assets? (Round answer to 2 decimal places, e.g. 15.25.)
2.Chapter 11 When the Master Printing Company filed for bankruptcy, it filed under Chapter 11 of the U.S. bankruptcy code. Key information is shown here: Assets Claims Mortgage bonds $27,000 Senior debentures 12,100 Junior debentures 8,500 Going concern value $37,500 Book equity −10,100 As a trustee, what reorganization plan would you accept? INTERMEDIATE(Questions 3–4) 3.Z-Score Fair-to-Midland Manufacturing, Inc. (FMM), has applied for a loan at True Credit Bank. Jon Fulkerson, the credit analyst at the bank, has gathered the following information from the company’s financial statements: Total assets $115,000 EBIT 7,900 Net working capital 4,100 Book value of equity 23,000 Accumulated retained earnings 19,600 Sales 112,000 The stock price of FMM is $31 per share and there are 7,800 shares outstanding. What is the Z-score for this company?
Southwestern Wear Inc. has the following balance sheet: The trustees costs total 281,250, and the firm has no accrued taxes or wages. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of 2.5 million is received from sale of the assets?
P15-25 Accounting for debt and equity investments This problem continues the Canyon Canoe Company situation from Chapter 14. Amber Wilson is pleased with the growth of the business and has decided to invest its temporary excess cash in a brokerage account. The company had the following securi-ties transactions in 2019. Jul. 1 Purchased 8,000 shares in Adobe Outdoor Adventure Company for $3 per share. Canyon Canoe does not have significant influence over Adobe. Jul 7 Purchased 35% of the stock of Bison Backpacks consisting of 43,750 shares of stock (out of a total of 125,000 shares) for $5 per share. Canyon Canoe does have significant influence over Bison. Jul 10 Purchased a bond from Camelot Canoes with a face value of $80,000. Canyon Canoe intends to hold the bond to maturity. The bond pays interest semiannually on June 30 and December 31. Sep. 30 Received dividends of $0.15 per share from Adobe. Nov. 1 Received dividends of $0.30 per share from Bison. Dec. 31 Received…
Merideth Harper has invested 25,000 in SW Development. The firm has recently declared bankruptcy and has 60,000 in unpaid debts. Explain the paymentsif any if Merideth in these situations. SW Development Company is in the sole owner owed the 60,000. SW Development Comany unlimited liability in a 50/50 patnership Ms Harper has unlimited liability for unpaid bills which means creditors can only claim against the 25,000 she invested Mrs Harper limited liablity which is 60,000
Long-Term Debt and Ethics You arc the CFO of Diversified Industries. Diversified has suffered through 4 or 5 tough years. This has deteriorated its financial condition to the point that Diversified is in danger of violating two loan covenants related to its largest loan, which is not due for 12 more years. The loan contract states that if Diversified violates any of these covenants, the loan principal becomes immediately due and payable. Diversified would be unable to make this payment, and any additional loans taken to repay this loan would likely be at higher rates, forcing Diversified into bankruptcy. An investment banker suggests forming another entity (called special purpose entities or SPE) and transferring some debt to this SPE. Structuring the SPE very carefully will have the effect of moving enough debt off Diversifier's balance sheet to keep the company in compliance with all its loan covenants. The investment banker assures you that accounting rules permit such accounting treatment. Required: How do you react to the investment banker?
Question Mr. Cauzone decided to wind-up his Company on 12/31/21. After selling all assets and settling all liabilities, there's S122,000 of Cash left in the Company. Mr. Cauzone owns all the shares of the Company with ACB of $7,000. He has come to you for advice and provided the following balances: PUC CSOH CDA GRIP $2,000 $5,000 $48,000 $24,000 Assuming Mr. Cauzone has no other income, calculate his Federal taxes payable / refundable for 2021, based on above.
Following an unprecedented decline in the sales for the past five years, the manufacturing business of partners A, B, and C was on the brink of bankruptcy. On January 7, 2005, the partners decided to liquidate. C, the managing partner, spearheaded the liquidation process and utilized the most recent statement of financial position shown below as starting point: ABC Manufacturing Statement of Financial Position For the year ended December 31, 2004 Assets Cash 20,000 Investments in Trading Securities Trade and other receivables (Note 5) 50,000 97,000 Inventories (Note 6) Prepaid expenses (Note 7) Property, plant, and equipment (Note 8) 65,000 3,500 219,000 Total assets 454,500 Liabilities and Partner's Equity Trade and other payables (Note 9) A, Capital (30%) B, Capital (30%) C, Capital (40%) Total Liabilities and Partner's Equity 36,500 170,000 48,000 200,000 454,500 Additional information pertaining to liquidation process: 1. Investments in Trading Securities were realized for P30,000.…
please solve for highlighted values - if you can provide formulas that would be helpful Holmes Corporation files a voluntary petition with the bankruptcy court in hopes of reorganizing. Company officials prepare a statement of financial affairs showing these debts: Liabilities with priority: Salaries payable $ 19,000 Fully secured creditors: Notes payable (secured by land and buildings valued at $85,000) 71,000 Partially secured creditors: Notes payable (secured by inventory valued at $31,000) 141,000 Unsecured creditors: Notes payable 51,000 Accounts payable 11,000 Accrued expenses 5,000 Holmes has 11,000 shares of common stock outstanding with a par value of $6 per share. In addition, the company currently reports a deficit balance of $153,000. In hopes of emerging from Chapter 11 bankruptcy, officials propose the following reorganization plan: The company’s assets have a total book value of $211,000, an amount…
The New England Company has a debt to a bank of $55,000. The company is currently being liquidated and believes that between $12,000 and $20,000 will be paid on that debt. According to the liquidation basis of accounting, what amount is reported for this liability?a. $12,000b. $16,000c. $20,000d. $55,000