actg 441 midterm 2

What is the purpose of US Bankruptcy Law?

Fair asset distribution

Discharge honest debtors from obligations

What are the types of bankruptcy?

Chapter 7: Liquidation

Chapter 11: Reorganization

What initiates involuntary bankruptcy?

Initiated by unsecured creditors

Requires 3+ unsecured creditors

$18,600 minimum debt

What does the Order for Relief trigger?

Automatic stay

Prohibits creditors from collecting debts

What are the trustee responsibilities in bankruptcy?

Collect assets

Distribute payments

Not to create reorganization plans

What are preference transfers in bankruptcy?

Pre-bankruptcy payments voided if they favor certain creditors

What are the types of liabilities in bankruptcy?

Secured

Unsecured

What is asset valuation in bankruptcy?

Pre-liquidation: net realizable value

Liquidation basis: estimated cash to be received

How are professional fees reported in bankruptcy?

Expensed immediately

What is meant by fresh start in reorganization?

Owners hold <50% post-bankruptcy

What is goodwill in reorganization?

Recorded if reorg value exceeds fair asset values

What is a cram down in bankruptcy?

Court approval despite creditor objection

What is the focus of non-profit accounting?

Organization-wide focus

Not shareholder value

What are the classifications of net assets in non-profits?

Without donor restrictions

With donor restrictions

3 types of restricted net assets (purpose, time, permanent)

What does the Statement of Activities show?

Changes in net assets by restriction type

Includes reclassifications when restrictions are met

What is the NFP version of the balance sheet?

Statement of Financial Position

What method does the Statement of Cash Flows often use?

Direct method

When are contributions recognized in non-profits?

When received or pledged (if unconditional)

What are conditional gifts recorded as in non-profits?

Recorded as liabilities or not at all

What are exchange transactions in non-profits?

Membership dues (with benefits) Program fees = exchange revenue

What are pass-through gifts in non-profits?

Recorded as liability if the NFP acts as an agent

When should donated services & goods be recorded?

Only if asset created/enhanced or specialized skill used

How should functional expenses be reported in non-profits?

Classify by function (program/supporting) and nature (salaries, rent)

What is the treatment of mergers in non-profits?

New entity is formed, so use carryover method

How are acquisitions treated in non-profits?

Recognize assets/liabilities at fair value

What is the reporting of charity care in healthcare entities?

Not reported as revenue or receivable

How should variable revenue be estimated in healthcare entities?

Use expected value or most likely outcome