Acctg Case Study

1. "Bankruptcy is a federal court process designed to help both businesses and consumers eliminate their debts or repay them under the protection of a bankruptcy court." When people/companies file for bankruptcy, creditors are not allowed to hassle or sue them to be paid. In addition, any lawsuits that have been brought up against the company/person stop. A company can file for bankruptcy and leave passengers unaffected because the carriers continue to run their route networks. In addition, the airlines continue with their frequent-flier plans. Occasionally, airlines put forward fare sales and mileage bonuses to ensure that the customer's remain with their carrier.

2. There are management issues associated with operating a company that is under a bankruptcy filing. The process is pricey and troublesome. The carriers must pay the bankruptcy lawyers and consultants, which also consists of the advisers to their creditors' committees. This takes up a great deal of the management's time. The companies must obtain approval from the court for the countless operating costs and decisions. Also, all of their activities are an open book. This is because filings, contracts, and business assessments are presented in public court filings.

3. At the end of June, Delta was reported to be more than $20 million in debt. The values of its outstanding shares have decreased to below $125 million.

-The SEC filing said that if Northwest refuses to make their pension payment, a lien would occur against its assets, unless it had formerly required bankruptcy protection. Northwest's liabilities and shareholders shortfall total $14.4 billion. In

the future, this could create problems, especially since the new law doesn't permit the debtor company to maintain exclusive rights to handle the reorganization plan.

4. The four specific items of debt payments that are due by this coming year are $470 million in maturing debt, $550 million in interest payments, $460 million due for operating leases, and $135 million in pension payments. Maturing debt and pension payments would be classified under the balance sheet. Interest payments would be classified under the income statement. Operating leases would be classified under the statement of cash flows.

5. I think GE is involved in financing Delta Airlines because of the