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Category > Accounting Posted 07 Jun 2017 My Price 5.00

Southwestern Wear Inc. has the following balance sheet:

Southwestern Wear Inc. has the following balance sheet:

Current assets $1,875,000   Accounts payable $375,000
Fixed assets 1,875,000   Notes payable 750,000
      Subordinated debentures 750,000
      Total debt $1,875,000
      Common equity 1,875,000
Total assets $3,750,000   Total liabilities and equity $3,750,000

The trustee's costs total $216,000, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.5 million is received from sale of the assets?

Distribution of proceeds on liquidation:

1. Proceeds from sale of assets   $  
2. First mortgage, paid from sale of assets $    
3. Fees and expenses of administration of bankruptcy $    
4. Wages due workers earned within 3 months
prior to filing of bankruptcy petition		 $    
5. Taxes $    
6. Unfunded pension liabilities $    
7. Available to general creditors   $  

Distribution to general creditors:


Claims of
General
Creditors

Claim
(1)
Application of 100%
Distribution
(2)		 After
Subordination
Adjustment
(3)
Percentage of
Original Claims Received
(4)
Notes payable $   $   $   %
Accounts payable $   $   $   %
Subordinated debentures $   $   $   %
Total $   $   $    

The remaining $   will go to the common stockholders.

Answers

Alpha Geek
(8)
Status NEW Posted 07 Jun 2017 03:06 PM My Price 5.00

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file 1496851085-Answer.docx preview (214 words )
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