Financial Aftermath of Restaurant Bankruptcy

Imagine this: After dreaming of a fantastic new concept, you and some friends decide to bring the idea to life by opening a restaurant. That restaurant grows into two restaurants, which turns into three restaurants and eventually into twenty locations within five years. Despite struggling to make ends meet after making the initial investment, you and your partners achieve strong growth and profitability in your restaurants. Unfortunately, over time, competitors crowd into the market, which starts to dig into the business’ top and bottom lines. This trend continues at an accelerated rate, foot traffic declines, and you are left with no other choice than to file for bankruptcy–the unfortunate byproduct of an often volatile industry characterized by fierce competition.

In the aftermath of the bankruptcy decision, the accountant is left to determine the appropriate accounting treatment. Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 852-10…