Corizon Company\'s balance sheet and income statement are shown below (in millio
ID: 2640939 • Letter: C
Question
Corizon Company's balance sheet and income statement are shown below (in millions of dollars). Corizon and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $5 preferred will be exchanged for one share of $2.00 preferred with a par value of $60 plus one 10% subordinated income debenture with a par value of $60. The $8 preferred issue will be retired with cash. The company's tax rate is 40%.
175
construct the pro forma balance sheet after the reorganization takes place. show the new preferred at its par value.
CURRENT ASSETS 200 CURRENT LIABILITIES175
NET FIXED ASSETS 225 ADVANCE PAYMENTS 10 $5 PREFFERED STOCK, $100 PAR VALUE (1,000,000) shares 100 $8 preferre stock, no par, callable at 100 (80,000 shares 8 common stock, $1.00 par value (5,000,000) shares 25 retained earnings 107 total assets 425 total claims 425Explanation / Answer
current Assets 192 Current Liability 175
Fixed Assets 225 Advance Payment 10
$2 preferred Stock
par value $ 60 60
10% Debenture 60
Common Stock 25
Retained Earning 87
417 417
Calculation of Retained Earnings = 107 - (60+60 - 100) = 87