Question

In: Accounting

Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...

Reorganization

The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars).

Balance Sheet
Current assets $168 Current liabilities $42
Net fixed assets 153 Advance payments 78
Goodwill 15 Reserves 6
$6 preferred stock, $112.50 par value (1,200,000 shares) 135
$10.50 preferred stock, no par, callable at $150 (60,000 shares) 9
Common stock, $1.50 par value (6,000,000 shares) 9
Retained earnings 57
Total assets $336 Total claims $336
Income
Net sales $540.0
Operating expense 516.0
Net operating income $ 24.0
Other income 3.0
EBT $ 27.0
Taxes (50%) 13.5
Net income $ 13.5
Dividends on $6 preferred 7.2
Dividends on $10.50 preferred 0.6
Income available to common stockholders $ 5.7

Verbrugge and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $6 preferred will be exchanged for one share of $2.80 preferred with a par value of $36.00 plus one 7% subordinated income debenture with a par value of $76.5. The $10.50 preferred issue will be retired with cash.

  1. Construct the projected balance sheet while assuming that reorganization takes place. Show the new preferred stock at its par value. Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places.
    The projected balance sheet (in millions of dollars) follows:
    Current assets $ Current liabilities $
    Net fixed assets $ Advance payments $
    Goodwill $ Reserves $
    Subordinated debentures $
    $2.8 preferred stock, $36 par value (1,200,000 shares) $
    Common stock, $1.50 par value (6,000,000 shares) $
    Retained earnings $
    Total assets $ Total claims $
  2. Construct the projected income statement. What is the income available to common shareholders in the proposed recapitalization? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places.
    The projected income statement (in millions of dollars) follows:
    Net sales $
    Operating expense $
    Net operating income $
    Other income $
    EBIT $
    Interest expense $
    EBT $
    Taxes (50%) $
    Net income $
    Dividends on $2.80 preferred $
    Income available to common stockholders $
  3. Required earnings is defined as the amount that is just enough to meet fixed charges (debenture interest and/or preferred dividends). What are the required pre-tax earnings before and after the recapitalization? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places.
    The required pre-tax earnings before recapitalization $ million
    The required pre-tax earnings after recapitalization $ million
  4. How is the debt ratio affected by the reorganization? Round your answers to two decimal places.
    The debt ratio before reorganization %
    The debt ratio after reorganization %

Solutions

Expert Solution


Related Solutions

Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $168 Current liabilities $42 Net fixed assets 153 Advance payments 78 Goodwill 15 Reserves 6 $6 preferred stock, $112.50 par value (1,200,000 shares) 135 $10.50 preferred stock, no par, callable at $150 (60,000 shares) 9 Common stock, $1.50 par value (6,000,000 shares) 9 Retained earnings 57 Total assets $336 Total claims $336 Income Net sales $540.0 Operating expense...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $168 Current liabilities $42 Net fixed assets 153 Advance payments 78 Goodwill 15 Reserves 6 $6 preferred stock, $112.50 par value (1,200,000 shares) 135 $10.50 preferred stock, no par, callable at $150 (60,000 shares) 9 Common stock, $1.50 par value (6,000,000 shares) 9 Retained earnings 57 Total assets $336 Total claims $336 Income Net sales $540.0 Operating expense...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $168 Current liabilities $42 Net fixed assets 153 Advance payments 78 Goodwill 15 Reserves 6 $6 preferred stock, $112.50 par value (1,200,000 shares) 135 $10.50 preferred stock, no par, callable at $150 (60,000 shares) 9 Common stock, $1.50 par value (6,000,000 shares) 9 Retained earnings 57 Total assets $336 Total claims $336 Income Net sales $540.0 Operating expense...
Problem 24-02 Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows...
Problem 24-02 Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $168 Current liabilities $42 Net fixed assets 153 Advance payments 78 Goodwill 15 Reserves 6 $6 preferred stock, $112.50 par value (1,200,000 shares) 135 $10.50 preferred stock, no par, callable at $150 (60,000 shares) 9 Common stock, $1.50 par value (6,000,000 shares) 9 Retained earnings 57 Total assets $336 Total claims $336 Income Net sales $540.0...
Problem 24-02 Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows...
Problem 24-02 Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $168 Current liabilities $42 Net fixed assets 153 Advance payments 78 Goodwill 15 Reserves 6 $6 preferred stock, $112.50 par value (1,200,000 shares) 135 $10.50 preferred stock, no par, callable at $150 (60,000 shares) 9 Common stock, $1.50 par value (6,000,000 shares) 9 Retained earnings 57 Total assets $336 Total claims $336 Income Net sales $540.0...
The Verbrugge Publishing Company's 2019 balance sheet and income statement are as follows (in millions of...
The Verbrugge Publishing Company's 2019 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $300 Current Liabilities $40 Net fixed assets $200 Advance payments by customers $80 Noncallable Preferred Stock, $6 coupon, $110 par value (1,000,000 shares) 110 Callable preferred stick, $10 coupon, no par, $100 call price (2,000,000 shares) 200 Common stock, $2 par value (5,000,000 shares) $10 Retained earnings $60 Total Assets $500 Total liabilities and equity $500 Income Statement Net...
The Verbrugge Publishing Company's 2018 balance sheet and income statement are as follows (in millions of...
The Verbrugge Publishing Company's 2018 balance sheet and income statement are as follows (in millions of dollars). Balance Sheet Current assets $168 Current liabilities $42 Net fixed assets 153 Advance payments 78 Goodwill 15 Reserves 6 $6 preferred stock, $112.50 par value (1,200,000 shares) 135 $10.50 preferred stock, no par, callable at $150 (60,000 shares) 9 Common stock, $1.50 par value (6,000,000 shares) 9 Retained earnings 57 Total assets $336 Total claims $336 Income Statement Net sales $540.0 Operating expense...
The Verbrugge Publishing Company’s 2019 balance sheet and income statement are as follows (in millions of...
The Verbrugge Publishing Company’s 2019 balance sheet and income statement are as follows (in millions of dollars): Balance Sheet Current assets Net fixed assets Total assets Income Statement Net sales Operating expense $300 200 $500 Current liabilities
Advance payments by customers Noncallable preferred stock, $6 coupon, $110 par value (1,000,000 shares)
Callable preferred stock, $10 coupon, no par, $100 call price (200,000 shares) Common stock, $2 par value (5,000,000 shares) Retained earnings Total liabilities & equity $ 40 80 110...
Selected balance sheet and income statement information from Verizon Communications Inc. follows. $ millions 2016 2015...
Selected balance sheet and income statement information from Verizon Communications Inc. follows. $ millions 2016 2015 Current assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,395 $ 22,355 Current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 30,340 35,052 Total debt . . . ....
The balance sheet and income statement for the McDonald's are as follows. McDonald's Corporation 2016 Income...
The balance sheet and income statement for the McDonald's are as follows. McDonald's Corporation 2016 Income Statement ($ Millions) Sales $11,508 Cost of goods sold   6,537 Gross profits $ 4,971 Marketing expenses and general     and administrative expenses $ 1,832 Depreciation expense    345 Total operating expenses $ 2,177 Operating profits $ 2,794 Interest expenses      387 Earnings before taxes $ 2,407 Income taxes      765 Net income before preferred stock dividends $ 1,642 Preferred stock dividends        25 Net income available to common...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT