Smith Corporation has gone through bankruptcy and is ready to emerge as a reorga

Question

Smith Corporation has gone through bankruptcy and is ready to emerge as a reorganized entity on December 31, 2017. On this date, the company has the following assets (fair value is based on discounting the anticipated future cash flows) Accounts receivable Inventory Land and buildings Machinery Patents s 22,200 S 20,280 154,eoe22,00e 295,800 156,888 133,000 154,886 267,600 129,eee sThe company has a reorganization value of $833.000 Smith has 50,000 shares of $10 par value common stock outstanding. A deficit Retained Earnings balance of $694,000 also is reported. The owners will distribute 35,600 shares of this stock as part of the reorganization plan The company's liabilities will be settled as follows . Accounts payable of $189000 (existing at the date on which the order for relief was granted) will be settled with an 8 percent, two- . Accounts payable of $97800 (ncurred since the date on which the order for relief was granted) will be paid in the regular course of . Note payable First Metropolitan Bank of $210.000 will be settled with an 8 percent, five-year note for $51.600 and 17,800 shares of . Note payable Northwestern Bank of Tulsa of $370000 will be settled with a 7 percent, eight year note for $110,000 and 17.800 year note for $35,900 business the stock contributed by the owners shares of the stock contributed by the owners b. Prepare a balance sheet for Smith Corporation upon its emergence from reorganization SMITH CORPORATION Balance Sheet

Explanation / Answer

SMITH CORPORATION Balance Sheet December 31, 2017 ASSETS Current Assets Accounts receivable $20,200.00 Inventory $122,000.00 $142,200.00 Land, Buildings, and Equipment: Land and buildings $295,000.00 Machinery $133,000.00 $428,000.00 Intangible Assets: Patents $154,000.00 Reorganization value in excess of amount allocable to identifiable assets ($833,000 - ($20200+$122000+$295000+$133000+$154000) $108,800.00 $262,800.00 Total Assets $833,000.00 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $97,800.00 Long?term Liabilities: Note payable (due in 2 years) $35,900.00 Note payable (due in 5 years) $51,600.00 Note payable (due in 8 years) $110,000.00 $197,500.00 Total Liabilities $295,300.00 Stockholders' Equity: Common stock (par value) $500,000.00 Additional paid?in capital (balancing figure) $37,700.00 Retained earnings $0.00 $537,700.00 Total Liabilities and Stockholders' Equity $833,000.00

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