1) On February 1, 2014, Hillary Company filed a petition for reorganization under the
bankruptcy statutes. The court approved the plan on September 1, 2014, including the
following provisions:
1>Accrued expenses of $21,930, representing priority items, are to be paid in full.
2>Hillary Company is to exchange accounts receivable in the face amount of $138,000
and an allowance for uncollectible accounts of $29,200 for the full settlement of
$198,600 owed on open account to one of its major unsecured creditors. The estimated
fair value of the receivables is $104,000.
3>Unsecured creditors of open accounts amounting to $91,600 and paid 40 cents on the
dollar in full settlement.
4>Hillary Companys only other major unsecured creditor agreed to a five-year
extension of the $500,000 principal owed him on a 10% note payable. Accrued interest
on the note on September 1, 2014, amounts to $45,000, one-third of which is to be paid
in cash and the remainder canceled. In addition, no interest is to be charged during the
remaining five years to maturity of the note.
Required:
Prepare journal entries on the books of Hillary Company to give effect to the preceding
provisions.
2) List the three major types of enterprise wide information disclosures required by
SFAS No. 131[ASC 280], and explain how the firms designation of reportable segments
affects these disclosures.
3) Differentiate between the admission of a new partner through assignment of an
interest and through investment in the partnership.
4) Some accountants hold the view that each interim period should stand alone as a
basic ac-counting period, whereas others view each interim period as essentially an
integral part of the annual period. Distinguish between these views.
5) An advance cash distribution plan specifies the order in which each partner will
receive cash and the dollar amount each will receive as it becomes available for
distribution. Identify the four steps in the preparation of an advance cash distribution
plan.
6) When the value implied by the acquisition price is below the fair value of the
identifiable net assets the residual amount will be negative (bargain acquisition).
Explain the difference in accounting for bargain acquisition between past accounting
and proposed accounting requirements.
7) Which method of translation is used to convert the financial statements when a
foreign subsidiary operates in a highly inflationary economy?