ANS:

a. First Mortgage 14% Bonds Payable 300,000

Unamortized Premium on 14% Bonds 13,000
10% Bonds Payable 250,000
Reorganization Capital 63,000
To replace 14% bonds with 10% bonds.

Accrued interest on 14% Bonds Payable 42,000

Common Stock ($1 par) 20,000
Reorganization Capital 22,000
To substitute 20,000 shares of common
for accrued interest.

b. Accounts and Notes Payable 90,000

Reorganization Capital 90,000
Creditors accepted plan to pay $.55 on
the Dollar.

c. 10% Cumulative Participating Preferred

Stock 1,000,000
Paid-in Capital in Excess of Par on
Preferred 170,000
8% Noncumulative Nonparticipating
Preferred Stock 400,000
Reorganization Capital 770,000
To replace $100 par preferred with
$40 par preferred stock.

d. Common Stock ($10 par) 2,000,000

Discount on Common Stock 80,000
Common Stock ($1 par) 200,000
Reorganization Capital 1,720,000
To record replacement of common stock.

e. Reorganization Capital 2,100,000

Retained Earnings 2,100,000
To eliminate the deficit.

DIF: D OBJ: 21-3

13. As of June 30, 20X4, the Lillie Corporation has the following assets, liabilities, and owners' equity:

Assets Book Value

Cash $ 10,000
Marketable securities 30,000
Accounts receivable (net) 40,000
Inventories 100,000
Land 50,000
Buildings (net) 140,000
Machinery (net) 105,000
Goodwill 40,000
Total $515,000

21-1
21-2
ESSAY

21-3