ACC 545 Week 4 Individual Assignment Restructuring Debt

ACC 545 Week 4 Individual Assignment Restructuring Debt

• Your company is in financial trouble and is in the process of reorganization. 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 post employment benefits for the year 2007:

• oAccumulated postretirement benefit obligation at January 1, 2007 $810,000
• oActual and expected return on plan assets $34,000
• oUnrecognized prior service cost amortization $21,000
• oDiscount rate 10%
• oService cost $88,000

• Part A
• Provide your manager a comparison of the current reporting for debt, explaining the requirements for each type (bond, mortgage, capital lease, and others). Then, prepare the journal entries for the restructuring.

• Part B
• To satisfy various benefit issues that have arisen as a result of the restructuring, new post employment benefits have been created. The company currently has a defined benefits plan and is considering switching to a defined contribution plan to save costs. Compute the costs associated with keeping the current plan versus the costs of a defined contribution plan where the employer pays 3% of payroll. The agreement is that the employees get to keep what is already in the defined benefit plan. This prevents the situation of having to compute how much the company would recapture in surplus assets resulting from terminating the old plan. Then, compute a new post employment benefit expense for 2007 and report this to your manager. Illustrate with schedules and notes.

 

Follow this link to get a similar paper written from scratch
Place an order for this assignment or any other paper with us. We guarantee that the paper will be delivered within the specified deadline. We also have a personalized customer support and you will be able to communicate with your writer throughout the order preparation process. Thank you for choosing us.