Dip Corporation Is in a Chapter 11 Bankruptcy Reorganization

question 25

Essay

Dip Corporation is in a Chapter 11 bankruptcy reorganization.For each of the following transactions relating to the reorganization,show the journal entry that would be required by Dip.Assume that all unsecured liabilities were not reclassified to Prepetition Claims Subject to Compromise.
1.Dip has $200,000 in bonds payable which mature at the end of the current year.The bondholders agree to accept $100,000 of new common stock and $75,000 cash,payable immediately.
2.Accrued interest on the bonds recorded at $20,000 will not be paid.
3.Recorded patents in the amount of $15,000 are determined to be worthless and are written off.
4.Equipment recorded net at $24,000 is appraised at $30,000.
5.A building recorded net at $78,000 is appraised for $87,000.
6.Creditors owed $120,000 recorded in accounts payable are paid $96,000 in full settlement.
7.Property taxes and payroll taxes withheld are paid in full at $12,000.
8.A capital lease recorded at $48,000 is re-negotiated,and the resulting operating lease will require monthly lease payments of $500.
9.An unsecured bank note amounting to $180,000 will be exchanged for $120,000 note secured by the building and equipment.
10.Current stockholders will exchange their stock which has a current book value of $300,000 for $100,000 common stock of the new entity.

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Definitions:

Dominion

Supreme authority or control over a domain, or the ownership and absolute right to use, enjoy, and dispose of property.

Real Property

Land and anything permanently attached to it, including buildings and other structures, considered a form of real estate.

Conversion

is a tort that involves the unauthorized taking or use of someone else's personal property, depriving them of its possession or use.

Trespass to Personal Property

A tort involving the intentional interference with the use or possession of personal property belonging to another.