At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown below (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee's costs amounted to $50,000; no single worker was due more than $2,000 in wages; and there were no unfunded pension plan liabilities.

Current Assets $400 Accounts Payable 50

Net fixed assets 600 Accrued Taxes 40

Accrued Wages 30

Notes Payable 180

Total Current Liabilities 300

First-mortgage bonds

Second-mortgage bonds 200

Debentures 200

Subordinated Debentures 100

Common Stock 50

Retained Earnings (150)

Total Assets $1000 Total Claims $1000

a. How much will McDaniel's shareholders receive from the liquidation?

b. How much will the mortgage bondholders receive?

c. Who are the other priority claimants (in addition to the mortgage bondholders)?

d. Who are the remaining general creditors? How much will each receive from the distribution before subordination adjustment? What is the effect of adjusting for subordination?