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0 Balance Sheet Current Liabilities Accounts Payable Accrued Wages Payroll Remittances Payable Notes Payable Total Current Liabilities $6,600,000 300,000 100,000 19,250,000 $26,250,000 Bankruptcy Worksheet, Question

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0 Balance Sheet Current Liabilities Accounts Payable Accrued Wages Payroll Remittances Payable Notes Payable Total Current Liabilities $6,600,000 300,000 100,000 19,250,000 $26,250,000 Bankruptcy Worksheet, Question 1 Priority of Claims 1 Unpaid suppliers 1 2 Trust Claims - EI, CPP, Tax 3 Secured Creditors (office building) 4 Unsecured Creditors Bankruptcy Costs Wages Payable total Long-term Liabilities Bonds Subordinate Debentures Total Long-term Liabilities $14,000,000 8.500.000 $22,500,000 Assets: cash from liquidation Priority claims Available to subordinated claims Subordinated Claims (pro rated) total Shareholders' Equity Preferred Shares Common Shares Total Equity $2,250,000 9,000,000 $11,250,000 claim after pro rated claim subordination Total Liabilities and Equity $60.000.000 Jaccounts payable notes payable Secured Creditors (subordinated claims) Subordinate Debentures Total Other inputs: % of subordinated claims to be paid #DIV/0! notes payable must be paid in full before any subordinate debentures are paid Realized liquidation value of all assets (including office building): $ ( 39,960,000 Part 2: notes payable 7,000,000 Realized liquidation value of office building: $ 7,880,000 Subordinated Claims (pro rated) total claim after pro rated claim subordination Maximum individual wage claim: $ 2,000 Inventory to be reclaimed: : $ 1,000,000 accounts payable notes payable Secured Creditors (subordinated claims) Subordinate Debentures Total Unpaid EI, CPP, Tax (payroll remittances) ) $ 100,000 Liquidation expense (bankruptcy costs) % of subordinated claims to be paid #DIV/01 notes payable must be paid in full before any subordinate debentures are paid $ 4,800,000 45,000,000 typical debt ratio 35% Part 3: Available to subordinated claims Total subordinated claims: Available to shareholders 45,000,000 Preferred Shares Common Shares Total Equity Bankruptcy Worksheet, Question 1, Page 2 Part 4: possible reorganzation if debt holders believe the company has going concern value Step 1: pay off wages and turst claims liquidation value wages payable trust claims balance Step 2: allocate value of office building to secured creditors balance office building remainder Step 3: allocation to unsecured creditors total claim after subordination pro rated claim accounts payable notes payable Secured Creditors (subordinated claims) Subordinate Debentures Total % of subordinated claims to be paid * notes payable must be paid in full before any subordinate debentures are paid Step 4. calculate total claim including value of office building to secured creditors accounts payable notes Secured Creditors (subordinated claims) =0.000 -0,000 Subordinate Debentures Total Step 5: determine the new capital structure using the industry debt ratio debt equity total Step 6: determine relative claims of original note and bond holders for proration dollars percentage notes bonds total Bankruptcy Worksheet, Question 1, Page 3 Step 7: determine debt available to unsecured creditors debt from step 5 to accounts payable to secured creditors (by office blde) available to unsecured creditors Step 8: prorate unsecured debt to original note and bond holders notes bonds total Step 9: prorate equity to original note and bond holders notes bonds total Step 10: Balance sheet after restructuring Balance Sheet Current Liabilities Accounts Payable Accrued Wages Payroll Remittances Payable Notes Payable Total Current Liabilities Long-term Liabilities Bonds (secured by office building) Subordinate Debentures to original note holders to original bond holders Total long-term Liabilities Shareholders' Equity to original note holders to original bond holders Total Equity Total Liabilities and Equity Note: bonds could be convertible so holders can participate in the success of the reorganization 0 Balance Sheet Current Liabilities Accounts Payable Accrued Wages Payroll Remittances Payable Notes Payable Total Current Liabilities $6,600,000 300,000 100,000 19,250,000 $26,250,000 Bankruptcy Worksheet, Question 1 Priority of Claims 1 Unpaid suppliers 1 2 Trust Claims - EI, CPP, Tax 3 Secured Creditors (office building) 4 Unsecured Creditors Bankruptcy Costs Wages Payable total Long-term Liabilities Bonds Subordinate Debentures Total Long-term Liabilities $14,000,000 8.500.000 $22,500,000 Assets: cash from liquidation Priority claims Available to subordinated claims Subordinated Claims (pro rated) total Shareholders' Equity Preferred Shares Common Shares Total Equity $2,250,000 9,000,000 $11,250,000 claim after pro rated claim subordination Total Liabilities and Equity $60.000.000 Jaccounts payable notes payable Secured Creditors (subordinated claims) Subordinate Debentures Total Other inputs: % of subordinated claims to be paid #DIV/0! notes payable must be paid in full before any subordinate debentures are paid Realized liquidation value of all assets (including office building): $ ( 39,960,000 Part 2: notes payable 7,000,000 Realized liquidation value of office building: $ 7,880,000 Subordinated Claims (pro rated) total claim after pro rated claim subordination Maximum individual wage claim: $ 2,000 Inventory to be reclaimed: : $ 1,000,000 accounts payable notes payable Secured Creditors (subordinated claims) Subordinate Debentures Total Unpaid EI, CPP, Tax (payroll remittances) ) $ 100,000 Liquidation expense (bankruptcy costs) % of subordinated claims to be paid #DIV/01 notes payable must be paid in full before any subordinate debentures are paid $ 4,800,000 45,000,000 typical debt ratio 35% Part 3: Available to subordinated claims Total subordinated claims: Available to shareholders 45,000,000 Preferred Shares Common Shares Total Equity Bankruptcy Worksheet, Question 1, Page 2 Part 4: possible reorganzation if debt holders believe the company has going concern value Step 1: pay off wages and turst claims liquidation value wages payable trust claims balance Step 2: allocate value of office building to secured creditors balance office building remainder Step 3: allocation to unsecured creditors total claim after subordination pro rated claim accounts payable notes payable Secured Creditors (subordinated claims) Subordinate Debentures Total % of subordinated claims to be paid * notes payable must be paid in full before any subordinate debentures are paid Step 4. calculate total claim including value of office building to secured creditors accounts payable notes Secured Creditors (subordinated claims) =0.000 -0,000 Subordinate Debentures Total Step 5: determine the new capital structure using the industry debt ratio debt equity total Step 6: determine relative claims of original note and bond holders for proration dollars percentage notes bonds total Bankruptcy Worksheet, Question 1, Page 3 Step 7: determine debt available to unsecured creditors debt from step 5 to accounts payable to secured creditors (by office blde) available to unsecured creditors Step 8: prorate unsecured debt to original note and bond holders notes bonds total Step 9: prorate equity to original note and bond holders notes bonds total Step 10: Balance sheet after restructuring Balance Sheet Current Liabilities Accounts Payable Accrued Wages Payroll Remittances Payable Notes Payable Total Current Liabilities Long-term Liabilities Bonds (secured by office building) Subordinate Debentures to original note holders to original bond holders Total long-term Liabilities Shareholders' Equity to original note holders to original bond holders Total Equity Total Liabilities and Equity Note: bonds could be convertible so holders can participate in the success of the reorganization

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