a. How much will SHs receive? b. How much will mortgage bondholders receive? c.H

Question

a. How much will SHs receive?

b. How much will mortgage bondholders receive?

c.How much will priority creditors receive?

d. Identify the remaining general creditors. How much will each receive before subordination adjustment?

e. How much will each general creditor receive after subordination adjustment?   

Sale of current assets Sale of fixed assets Trustee costs 700,000 900,000 70,000 Before Default 1.260.000 1,200,000 Before Default Balance Sheet Current Assets Net fixed assets 300,000 40,000 25,000 45,000 410,000 600,000 400,000 500,000 300,000 200,000 50,000 2,460,000 Accounts payable Accrued tares Accrued wages Notes payable Total current liabilities First-mortgage bonds Second-mortgage bonds Debentures Subordinated debentures Common stock Retained earnings Total claims Total assets 2,460,000

Explanation / Answer

a)SH meansnot clear to answer
b)Mortagae bondholders will receive 900,000 since these are backed by assets they will get first priority
c)Priority creditors receive the amount left after paying for trustee cost. so remaining is 700,000-70,000=$630,000. in this 500,000 will go to priority creditors
d)notes payable will get 45000 and remaining is 630,000-500,000-45,000=$85,000. This will go to subordinate debendutures.

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