Restructuring Debt Data
Your company is in financial trouble and is in the process of reorganizing. Your manager wants to know how you will report on restructuring the debt. Use the following information to help with this assignment.
• Part A
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 108,340
Trade accounts receivable, net of allowances 2,866,260
Other receivables 62,150
Operating supplies, at lower of average
cost or market 58,630
Prepaid expenses 446,050
Total Current Assets 3,541,430
PROPERTY, PLANT, AND EQUIPMENT (at cost)
Land 1,950,000
Buildings and improvements 2,327,410
Equipment 5,015,660
Other equipment and leasehold improvements 1,645,580
total 10,938,650
Accumulated depreciation and amortization (7,644,430)
Net Property, Plant, and Equipment 3,294,220
OTHER ASSETS
Deposits and other assets 1,000,080
TOTAL ASSETS $ 7,835,730
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 972,160
Accrued liabilities 2,071,270
Accrued claims costs 793,620
Federal and other income taxes 19,710
Deferred income taxes 500
Current maturities of long-term debt and
capital lease obligations 50,610
Short-term borrowings 249,250
Total Current Liabilities 4,157,120
LONG-TERM LIABILITIES
Capital lease obligation 54,580
Note outstanding 3,000,000
Mortgage outstanding 608,030
Other liabilities 95,860
Total long-term liabilities 3,758,470
Total Liabilities 7,915,590
SHAREHOLDERS’ EQUITY (DEFICIT)
Common stock, $.01 par value; authorized
500,000 shares; issued 231,000 shares 2,310
Additional paid-in capital 731,090
Accumulated other comprehensive loss (113,500)
Retained earnings (deficit) (639,180)
Treasury stock (60,580)
Total Shareholders’ Equity (Deficit) (79,860)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 7,835,730
• Part B
As stipulated, your company is having financial difficulty and has asked the bank to restructure its $3 million note outstanding. The present note has 3 years remaining and pays a current interest rate of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. The bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $1,950,000 and a fair value of $2,400,000.
The company provides the following information related to its postemployment benefits for the year 2007:
o Accumulated postretirement benefit obligation at January 1, 2007: $810,000
o Actual and expected return on plan assets: $34,000
o Unrecognized prior service cost amortization: $21,000
o Discount rate: 10%
o Service cost: $88,000
I do not understand what I am being asked to do?
