Restructuring Debt To: Finance Accounting Manager, XYZ Company Re: Restructuring Debt XYZ Company is experiencing some financial trouble and management is asking that a memo be prepared to entail important disclosures when dealing with long term debt. According to Kiesco, long-term debt consists of probable future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer (2007, p.672). There
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Restructuring Debt Accounting 545 PART A Debt can be categorized into three major categories, bonds, notes payable, and capital leases. They are all forms of debt that have similarities and differences. The comparison for the current reporting for debt based on bonds, notes payable and capital leases are stated below: Bonds: Bonds are considered long-term liabilities and have a different maturity date then current liabilities. The maturity date for a bond is usually a longer period of
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Restructuring Debt 1 Restructuring Restructuring Debt 2 The three common long term debt options are bonds, notes, and capital leases. These three financing options provide companies with needed resources when looking to finance business opportunities or restructure debt, the company must decide which options if not all are right for their business and restructuring of debt. Bonds, Notes, and Capital Leases Bonds are certificates issued to companies who promise
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Part A Company A is in financial trouble. The company is reorganizing its processes and is looking to restructure its debt. Debt restructure is a mutual agreement between a financially troubled company and this company’s creditor, the bank. This process will reorganize the liabilities to prevent foreclosure or even asset liquidation (Business Dictionary, 2012). The liabilities under consideration for Company A are its capital lease obligations, notes outstanding liability, and mortgage outstanding
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PART A How a debt is classified impacts the reporting requirements and hence in its presentation in the financial statements. The following compares the current reporting for debt and each type of bonds. • Long term bond liabilities – reported at amortized value. If a bond was issued at a premium, the total bond liability reported by the issuer is equal to the par value plus the unamortized premium. Par value of bond liability ± Unamortized premium (discount) • Capital leases are included
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Restructuring of Debt Data | Long-term debt consists of probable future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer. Long term debt is a way to finance and gain capital when the company cash flow is minimal. To name a few types of long term debt: bonds payable, notes payable, mortgages payable, pension liabilities, and lease liabilities. This assignment will define basic terms
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ABC Company is in financial trouble and management has decided that reorganization is in order. The company’s debts need to be decreased using available assets. The bank has agreed to relinquish claim on notes outstanding in exchange for fixed assets. Currently, the company’s total liabilities exceed the total assets. Long-term debt consists of “probable future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company
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Restructuring Debt Name Financial Reporting/ACC 545 Date Professor PART A Long-term debt includes loans and financial obligations due or payable within a year or longer. Long-term debt liabilities appear on the company’s balance sheet and can include bonds payable, long-term notes payable, mortgages payable, pension liabilities, and lease liabilities (Kieso, Weygandt &Warfield). A corporation’s bylaws usually require approval by the board of directors and the stockholders before long-term
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assets. In debt restructuring, if there is a substantive modification of any of the terms of the existing debt or a purchase or other settlement of an existing debt through repayment or replacement, then the debtor needs to account for a gain or loss on the debt restructuring. In the company’s case, the debt was settled earlier than it original maturity date, hence there was a substantive modification of terms. The following are the journal entries required for the company’s current debt restructuring:
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What does the doctrine of adverse possession provide? In its most basic sense, “adverse possession” is a legal doctrine that allows a person to acquire legal ownership of property that he treats as his own, if he does so for a long enough period of time, even though the property is not his own. In other words, a person who uses another person’s property, without permission, for a long enough period of time, can acquire legal ownership of that property. What elements need to be proven? 1
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