Page 130 - Bankruptcy Volume 1
P. 130
3. Record the adoption of fresh-start accounting.
Listed here is a balance sheet for Trouble Business. Trouble Business filed a Chapter 11 petition one
year ago and, during the bankruptcy period, the accountant adjusted all prepetition liabilities to reflect
the amount of the allowed claims. The balance sheet as of the confirmation date includes the following:
(In Thousands)
Book Value Fair Value
Cash $ 4,000 $ 4,000
Inventory 23,000 25,000
Accounts receivable (net) 35,000 35,000
Other 4,600
Property, plant, and equipment (net) 2,300 3,300
Trademarks 10,000
Related party advance and other 8,000
Total $ 76,900 $ 77,300
Current liabilities
Book Value
Taxes $ 2,500
Accounts payable 5,000
Administrative expenses 2,500
Liabilities subject to compromise
Trade payables 22,000
Line of credit 43,000
Unsecured note payable 5,000
Long-term debt 5,000
Total 75,000
Stockholders’ equity
Common stock 3,500
Retained earnings (deficit) (11,600)
(8,100)
Total $ 76,900
The confirmed plan provides for the following:
128 © 2020 Association of International Certified Professional Accountants
