Professional Documents
Culture Documents
edition)
CORPORATE LIQUIDATIONS, REORGANIZATIONS, AND DEBT
RESTRUCTURINGS FOR FINANCIALLY DISTRESSED CORPORATIONS
LO1
1. When the bankruptcy court grants an order for relief
LO1
2. Which of the following must approve a Chapter 11 plan?
LO1
3. When the accounting equation of a corporation computes a negative
ownership position, because liabilities are greater than assets,
the firm is
a. a distressed corporation.
b. a bankrupt corporation.
c. insolvent in the equity sense.
d. insolvent in the bankruptcy sense.
LO1
4. A bankruptcy petition filed by a firm’s creditors is
a. a Chapter 7 petition.
b. a petition for liquidation.
c. an involuntary petition.
d. a voluntary petition.
LO1
5. The duties of a debtor in possession in a Chapter 11 bankruptcy
case do not include
LO1
6. Liabilities incurred after entering Chapter 11
LO1
7. In a troubled debt restructuring involving a modification of
terms, the debtor’s gain on restructuring
LO1
8. A single creditor
LO1
9. A case against a corporate debtor
LO1
10. A primary difference between voluntary and involuntary bankruptcy
petitions is that
LO1
11. Creditor committees are elected
LO2
12. The first-to-last ranking order of priority of the following:
I.stockholder claims
II.unsecured priority claims
III.secured claims
II.unsecured nonpriority claims
LO2
13. In typical trustee accounting
LO2
14. Trustees in a bankruptcy cases have the duty to
a. nullify affiliate transactions.
b. relegate tax payments to an unsecured status.
c. call creditor meetings on liquidation proceedings.
d. provide payments to creditors and customers.
LO3
15. If a debtor has material gains on its debt restructurings, these
gains will be reported as
LO3
16. A creditor will record assets transferred in full settlement of
a note receivable at the
LO3
17. A judge would permit a debtor-in-possession in a
LO4
18. Under the AICPA’s SOP 90-7, a reorganized company must meet a
“reorganization value test” as one of the two conditions
necessary for fresh start accounting. Reorganization value
approximates the
LO4
19. Under the AICPA’s SOP 90-7, “prepetition liabilities subject to
compromise” are liabilities incurred before the Chapter 11 filing
and are classified as
a. residual claims.
b. contingent claims.
c. current operating claims.
d. unsecured and undersecured claims.
LO4
20. Which of the following statements is correct concerning companies
emerging from reorganization under Chapter 11 when they do not
qualify for fresh start accounting?
SOLUTIONS
2. d
3. d
4. c
5. d
6. d
7. d
8. c
9. c
10. a
11. b
12. b
13. d
14. d
15. c
16. d
17. b
18. a
19. d
20. c