Question
Acme Co. was a successful manufacturing company for many years. Ten years ago, the company purchased a new building for $800,000. To do so, it
Acme Co. was a successful manufacturing company for many years. Ten years ago, the company purchased a new building for $800,000. To do so, it used $350,000 cash and borrowed the rest as first and second mortgages. Unfortunately, the recession years were difficult for the company, creating serious financial difficulties. Acme Co. later went into bankruptcy. Below is a summary of the funds realized from the sale of assets and the debt situation at the time.
The trustee in bankruptcy realized the following amounts from the sale of the business assets:
Assets: | Creditor Claims: |
Building $300,000 | First mortgage (building) $200,000 |
Storage Shed $50,000 | Second mortgage (building) $175,000 |
Vintage wine $35,000 | Conditional sale agreement (shed) $30,000 |
Car $50,000 | Chattel mortgage on car $30,000 |
Municipal Taxes ($10,000/yr) $30,000 | |
Accounts Receivable $10,000 | Rent ($5,000/month) $25,000 |
Bank Accounts $5,000 | Trade Creditors $160,000 |
Misc Equipment $15,000 | |
Trade Fixtures $10,000 | |
Antique Register $5,000 | |
Total Assets $480,000 | Total Claims $650,000 |
The expenses of liquidation were $1,500. The trustees fee was $2,000.
- Use the following headings and layout to show the order in which the trustee in bankruptcy made payments to the various types of creditors. Assume that all secured creditors had taken the necessary steps to protect their security.
Total of liquidated assets:
Less payments to secured creditors:
Total:
Less payments to preferred creditors:
Total:
Total left to pay general creditors:
Payments to general creditors:
Total:
- Determine how many cents on the dollar the general creditors should receive.
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