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Individual Assignment: Restructuring Debt Your company is in financial trouble and is in the process of reorganization.
Individual Assignment: Restructuring DebtYour 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 AASSETS CURRENT ASSETS 108,340 2,866,260 62,150 Operating supplies, at lower of average 58,630 446,050 3,541,430 PROPERTY, PLANT AND EQUIPMENT (at cost) 1,950,000 2,327,410 5,015,660 1,645,580 total 10,938,650 (7,644,430) Net Property, Plant, and Equipment 3,294,220 OTHER ASSETS 1,000,080 7,835,730 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES 972,160 2,071,270 793,620 19,710 500 Current maturities of long-term debt and 50,610 249,250 4,157,120 LONG-TERM LIABILITIES 54,580 3,000,000 Mortgage Outstanding 608,030 95,860 Total Long-term Liabilities 3,758,470 7,915,590 SHAREHOLDERS' EQUITY (DEFICIT) Common stock, $.01 par value; authorized 2,310 731,090 (113,500) (639,180)Treasury stock (60,580) (79,860) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,835,730 Part BAs 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: Accumulated postretirement benefit obligation at January 1, 2007 $810,000 Actual and expected return on plan assets $34,000Unrecognized prior service cost amortization $21,000Discount rate 10%Service cost $88,000Part AProvide 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 BTo 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.