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50. (continued)
b. According to the statement of financial affairs prepared above, $3,000 cash
c. As indicated in part b, only 6% of the unsecured nonpriority claims can be
satisfied. Thus, just $1,500 will be paid on the unsecured $25,000 note
payable.
d. Selling plot D for $30,000 rather than $27,000 generates an additional $3,000 in
available cash. The statement of financial affairs produced above would then
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51. (40 Minutes) (Prepare a statement of financial affairs)
LYNCH, INC.
Statement of Financial Affairs
March 14, 2017
Available for
Book Unsecured
Values Assets Creditors
Pledged with Fully Secured Creditors:
$40,000 Land and building $75,000
Less: Notes payable (70,000) $5,000
25,000 Accounts receivable 15,000
100,000 Inventory 33,000
15,000 Investments 21,000
Total available to pay liabilities with
priority and unsecured creditors $75,000
Less: Liabilities with priority
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51. (continued)
Unsecured—
Book Nonpriority
Values Liabilities and Stockholders’ Equity Liabilities
Liabilities with Priority:
-0- Administrative expenses (estimated) $16,000
Partially Secured Creditors:
150,000 Notes payable $150,000
Equipment (19,000) $ 131,000
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52. (30 Minutes) (Prepare a statement of realization and liquidation)
a. LYNCH, INC.
Statement of Realization and Liquidation
March 14, 2017 to July 23, 2017
Stock-
Liabilities Fully Partially Unsecured holders’
Noncash with Secured Secured Nonpriority Equity
Cash Assets Priority Creditors Creditors Liabilities (Deficits
Accounts receivable collected
—remaining balance assumed
to be uncollectible 18,000 (25,000) (7,000)
Inventory sold 40,000 (100,000) (60,000)
claims reclassified as
unsecured liabilities _______ (139,000) 139,000
Final balances remaining for
unsecured creditors $81,000 -0- $26,000 -0- -0- $186,000$(131,000)
b. The statement of realization and liquidation prepared in (a) indicates that $81,000 in cash remains. $26,000 of
— Notes Payable ………………………………………………….. 50,000
Accounts Payable …………………………………………….. 10,000
— Gain on Debt Discharge ……………………………………. 130,200
Develop Your Skills
Research Case 1
This case allows the student to review the official information provided by the
Securities and Exchange Commission in connection with bankrupt organizations,
as well as gain information about reporting requirements for organizations in
bankruptcies. In addition, this assignment allows the student to see how the SEC
attempts to educate the public on matters pertaining to financial investing.
This site includes a significant amount of general information including the
following:
▪ The differences between a Chapter 7 and a Chapter 11 bankruptcy.
▪ The development of a reorganization plan.
▪ Steps in a Chapter 11 reorganization, especially those that involve the SEC.
▪ Conveyance of information about a bankruptcy.
▪ Sources of additional information for a specific bankruptcy case.
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Research Case 2
This assignment provides the student with the chance to work with actual data
from a real company. Thus, students get a feel for the process of retrieving
information of interest about a company that is going through bankruptcy. In
addition, this assignment can help them appreciate the frustration that
2. Chapter 11 Reorganization
On June 13, 2009, Six Flags, Inc. (“SFI”) and certain of its domestic subsidiaries
(collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of
the United Stated Bankruptcy Code in the United States Bankruptcy Court for the
Mexico were not debtors in the Chapter 11 Filing.
On April 30, 2010, the Bankruptcy Court entered an order confirming the Debtors’
Modified Fourth Amended Joint Plan of Reorganization and the Debtors emerged
from Chapter 11. Pursuant to the reorganization plan, all of SFI’s common stock
and other equity and debt securities were canceled as of April 30, 2010. Pursuant
Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 852, Reorganizations (“FASB ASC 855″), we adopted
fresh start accounting, pursuant to which the Company’s estimated fair value was
allocated to its underlying assets and liabilities, which results in financial
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provisions for losses resulting from the reorganization of the business, as well as
professional fees directly related to the process of reorganizing the Debtors
under the Bankruptcy Code. The Debtors’ reorganization items consisted of the
following during the years ended December 31, 2013, 2012 and 2011:
Year Ended December 31,
Costs and expenses directly related to the reorganization primarily include
professional fees associated with advisors to the Debtors, certain creditors and
the creditors’ committee.
Analysis Case 1
This case asks the student to determine the information that is available about
the bankruptcy filing of the Great Atlantic & Pacific Tea Company (A & P). As a
legal proceeding that will affect literally thousands of people and companies,
there is a vast array of information that is readily available and can be found in
several different ways. Here is just some of the information that can be found
about this company and its bankruptcy process.
One primary source of information is provided by the law firm of Pachulski Stang
to solicit and receive comments from unsecured creditors about the pending
chapter 11 bankruptcy cases of the Great Atlantic & Pacific Tea Company et al.
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States Bankruptcy Court for the Southern District of New York in White Plains,
New York (the “Bankruptcy Court”). Judge Robert D. Drain is the presiding judge.
On July 20, 2015, the Bankruptcy Court ordered that the cases be administratively
consolidated under case number 15-23007. (For a complete list of the debtors and
case numbers, please refer to the joint administration order.)
“Committee Appointment
“On July 24, 2015, the U.S. Trustee appointed members to a committee of
unsecured creditors (“Committee”): C&S Wholesale Grocers, McKesson
Corporation, CBA Industries, Pension Benefit Guaranty Corporation, United Food
“For More Information
“Please contact Jason Rosell with any questions, comments, or requests
regarding the A&P Tea cases. For information on how to gain access to
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Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Numerous links are listed on the left side of this website page providing sources
of a considerable amount of potential information including:
Great Atlantic & Pacific Tea Company chapter 11 petition
First-day declaration
A&P Tea schedules (including statement of financial affairs)
Monthly operating report – July/August 2015
In addition, there is a link to the following URL:
https://cases.primeclerk.com/aptea/
At this second website, more information about the case is available much of
which is provided by links to other sources.
“Case Background
“On July 19, 2015, The Great Atlantic & Pacific Tea Company, Inc. and 20 affiliated
“Important Information & Dates
“General Bar Date
“The Bankruptcy Court has set the following deadlines for filing proofs of claim
against the Debtor:
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2015
“Governmental Unit Bar Date: January 19, 2016
“Click on “Submit a Claim” above to download a proof of claim form and for more
information regarding filing a claim against the Debtor.
“Notice of Sale of “Sandwich” Leases
“Second Sandwich Lease Bid Process Letter
“Sandwich Lease Bid Process Letter
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bids for a total of 118 Stores, as set forth in certain asset purchase agreements
(the “Asset Purchase Agreements”). Each bid remains subject to higher or better
“Click below to view the Debtors’ Form Going Concern Asset Purchase
Agreement.
“Form Lease Sale Agreement
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“Sale Notice
“Click below to view the list of contracts proposed to be assumed and assigned
“Click below to view the Intellectual Property Sale Notice (with Appendix A and
Appendix B):
“IP Asset Sale Notice
“Information Regarding Appointment Committee of Retirees
“On August 14, 2015, the Bankruptcy Court entered an order approving
1114 of the Bankruptcy Code, you may be eligible to serve on this committee. If
you believe you are eligible and would like to serve on this committee, please
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“Questionnaire
“Order”
Analysis Case 2
While an entity is going through bankruptcy reorganization, creditors, investors,
employees, and other interested parties all want to know the current status of the
about scores of well-known bankruptcy cases including:
• AMF Bowling Worldwide
• Anna’s Linens
• City of Detroit, Michigan
• Deb Stores
• Lehman Brothers Holding
• National Envelope
• Nortel Networks
• Sea Island
• Washington Mutual
Communications Case 1
A study of almost any large bankrupt organization can lead to a considerable
degree of speculation as to the reasons for the company’s decline. For example,
the following articles provide a few examples of the discussions surrounding the
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struggles of Borders Group. Because the company was widely known, its
bankruptcy has been closely followed by the press. Now that this bankruptcy
17, 2011.
“When One of the Giants Falls.” New York Times, February 17 2011.
“Borders bankruptcy: 200 store closings point to the rise of e-books,” The
Christian Science Monitor, February 16, 2011.
“Borders Bankruptcy to Ripple through Industry,” Publishers Weekly, February
COMMUNICATIONS CASE 2
This assignment is designed so that the student can work with several practical