EBK FINANCIAL MANAGEMENT: THEORY & PRAC
15th Edition
ISBN: 9781305886902
Author: EHRHARDT
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 24, Problem 3P
a.
Summary Introduction
To determine: The amount that shareholders will receive from liquidation.
b.
Summary Introduction
To determine: The amount that first mortgage bond holders will receive from liquidation.
C.
Summary Introduction
To determine: Other priority claimants and the amount that will be received by them.
e.
Summary Introduction
To determine: The remaining claimants and the amount that they will receive before and after subordination adjustments.
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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.
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).
Chapter 24 Solutions
EBK FINANCIAL MANAGEMENT: THEORY & PRAC
Ch. 24 - Prob. 1QCh. 24 - Why do creditors usually accept a plan for...Ch. 24 - Would it be a sound rule to liquidate whenever the...Ch. 24 - Why do liquidations usually result in losses for...Ch. 24 - Prob. 5QCh. 24 - Southwestern Wear Inc. has the following balance...Ch. 24 - Prob. 3PCh. 24 - Prob. 4PCh. 24 - Prob. 5SPCh. 24 - Prob. 1MC
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