Shareholder Claims Tronic Corporation has financed its operations through a combination of debt and equity financing. The company’s liabilities and stockholders’

equity accounts are as follows:

Tronic Corporation has very poor prospects for the future and has been unable to meet its obligations as they come due. Accordingly, the board of directors has decided to liquidate the company. The stated liquidation value of the Class B preferred stock is $28 per share. The Class A preferred stock has no stated liquidation value, and shareholder claims will be equal to the par value. The preferred stocks are noncumulative and nonparticipating. If Tronic has total assets worth approximately $50,000,000 in liquidation:

a. What amount would you expect to be available to meet the claims of the common shareholders? Prepare a schedule to support your answer.

b. How much would shareholders be likely to receive for each share of common stock held?

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Accounts payable and accrued expenses Short-term bank notes $ 389,600 500,000 Mortgage payable 1,300,000 Debentures 5,000,000 $100-par preferred stock, class A 10,000,000 $25-par preferred stock, class B 20,000,000 $10-par common stock 40,000,000 Additional paid-in capital from the issuance of $100 preferred stock 1,500,000 Additional paid-in capital from the issuance of $25 preferred stock Additional paid-in capital from the 1,900,000 issuance of $10 common stock 20,700,000 Additional paid-in capital from the expiration of stock options 100,000 Retained earnings (deficit) (4.650.000) Treasury stock (500,000 shares, at cost) (9,000,000)