What are possible reasons for a company with $20 million worth of assets that files for chapter 7 bankruptcy and a secured creditor with claims of over $100 million and the building as a secuirty end up with nothing?

What are possible reasons for a company with $20 million worth of assets that files for chapter 7 bankruptcy and a secured creditor with claims of over $100 million and the building as a secuirty end up with nothing?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter23: Corporate Restructuring

Section: Chapter Questions

Problem 6P

See similar textbooks

Similar questions

Ataway Company has suffered severe financial difficulties and is considering filing a bankruptcy petition. It has the following assets and liabilities. The assets are stated at net realizable value. Assets (pledged against debts of $74,000) $ 124,000 Assets (pledged against debts of $138,000) 54,000 Other assets 84,000 Liabilities with priority 76,400 Other unsecured creditors 204,000 In a liquidation, how much money would be paid on the partially secured debt?
Telstar Co. had severe financial difficulties and was considering the possibility of filing a bankruptcy petition. At that time, the company had the following assets (stated at net realizable value) and liabilities. Assets (pledged against debts of $91,000) 150,800 Assets (pledged against debts of $169,000) 65,000 Other assets 104,000 Liabilities with priority 54,600 Unsecured creditors 60,000 A. Prepare a schedule to show the amount of total assets available to pay liabilities with priority and unsecured creditors B. Prepare a schedule to show the amount of assets that are available for unsecured creditors after payment of liabilities with priority C. Prepare a schedule to show the amount of total unsecured liabilities D. Prepare a schedule…
Ataway Company has severe financial difficulties and is considering filing a bankruptcy petition. At this time, it has the following assets and liabilities. The assets are stated at net realizable value. Assets (pledged against debts of $70,000) . . . . . . . . . . . . . . . . $116,000Assets (pledged against debts of $130,000) . . . . . . . . . . . . . . . . . 50,000Other assets . . . . . . . . . . . . . . . 80,000Liabilities with priority . . . . . . . 42,000Other unsecured creditors . . . 200,000 In a liquidation, how much money would be paid on the partially secured debt?
Xavier Company is going through a Chapter 7 bankruptcy. All assets have been liquidated, and the company retains only $26,200 in free cash. The following debts, totaling $43,050, remain: Indicate how much money will be paid to the creditor associated with each debt.
At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown here (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee’s costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. a. How much will McDaniel’s shareholders receive from the liquidation? (SHOW ALL WORK). b. How much will the mortgage bondholders receive? (SHOW ALL WORK). c. Who are the other priority claimants (in addition to the mortgage bondholders)? How much will they receive from the liquidation? (SHOW ALL…
At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown here (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee’s costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. Balance Sheet (Thousands of Dollars) Current assets $ 400 Accounts payable $50 Net fixed assets 600 Accrued taxes 40 Accrued wages 30 Notes Payable 180 Total current liabilities 300 First-mortgage bonds $300 Second-mortgage bonds 200 Debentures 200…
At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown here (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee’s costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. How much will each general creditor receive from the distribution before subordination adjustment and what is the effect of adjusting for subordination? (SHOW ALL WORK).
At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown here (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee’s costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. Balance Sheet (Thousands of Dollars) Current assets $ 400 Accounts payable $50 Net fixed assets 600 Accrued taxes 40 Accrued wages 30 Notes Payable 180 Total current liabilities 300 First-mortgage bonds $300 Second-mortgage bonds 200 Debentures 200…
The following information was gathered from the books of Gorgeous Company which is currently undergoing bankruptcy proceedings.· Note payable of P97,500 is secured by furniture and equipment with a carrying amount of P120,000 that is estimated to be 75% realizable.· A mortgage payable of P192,500 is secured by building valued at P35,000 less than carrying amount of P230,000· Assets not mentioned above have an estimated value of P62,500, an amount that is P15,000 above carrying amount.· Total liabilities not mentioned above total P96,000, including claims with priority of P18,500 How much is the amount available to Unsecured Creditors?
The Sunshine Company has the following data in connection with its bankruptcy petition with the Securities and Exchange Commission at the end of 2018. Unsecured creditorsP287.500. Liabilities with priority137,500 Secured Liabilities Debt 1, P262,500; value of pledged asset 225,000 Debt 2, P212,500, value of pledged asset 125,000 Debt 3, P150,000, value of pledged asset 175,000' The company also has a number of other assets that are not pledge in any way, The creditors holding Debt 2 want to receive at least P177,50 Required: For how much do these free assets have to be sold so that Debt 2 would receive exactly P177,500. Show your solution
Kent Co. filed a voluntary bankruptcy petition on August 15, 2008, and the statement of affairs reflects the following amounts: Assets Book value Estimated Market value Pledged with fully secured creditors P300,000 P370,000 Pledged with partially secured creditors 180,000 120,000 Free Assets 420,000 320,000 Liabilities With priority 70,000 Fully secured 260,000 Partially secured 200,000 Unsecured 540,000 What amount of cash will be available for unsecured creditors?
25 Spectrum Corporation is experiencing severe financial difficulties and is considering filing a bankruptcy petition. At this time, it has the following information: Notes payable amounting to P92,000 is secured by Furniture estimated to be sold at P102,500 which is 2/3 of its recorded amount. Of the P244,500 loans payable, P68,750 is secured by a machinery with a carrying amount of P96,000 expected to make proceeds equal to 70% of its book value. Equipment with a carrying amount of P161,250 has an estimated realizable value of P123,750. Other unrecorded liabilities are accrued interest on notes, P3,875; salaries payable, P21,750; taxes payable, P14,500; and trustee’s fee, P10,625. Cash available prior to liquidation amounts to P14,875. Total assets of Spectrum Corp. presented in the Statement of Financial Position prior to liquidation amounts to P600,000 including prepaid expenses and goodwill amounting to P9,500 and P27,500, respectively which have no estimated realizable…