At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet provided in the Microsoft Excel Online file below. The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $490,000, while the current assets were sold for another $290,000. Thus, the total proceeds from the liquidation sale were $780,000. The trustee's costs amounted to $40,000; no single worker was due more than $2,000 in wages; and there were no unfunded pension plan liabilities. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
- How much will McDaniel's shareholders receive from the liquidation? If your answer is zero, enter "0". Round your answer to the nearest dollar.
- How much will the mortgage bondholders receive? If your answer is zero, enter "0". Round your answer to the nearest dollar.
How much will other priority claimants receive from the liquidation? Do not round intermediate calculations. Round your answers to the nearest dollar.
| Claimant | Amount |
| Trustee's expenses | $ |
| Workers' wages due | $ |
| Governments' taxes due | $ |
| Total | $ |
- How much will the remaining general creditors receive from the distribution before subordination adjustment? If your answer is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest dollar.
| Account | Amount Received |
| Accounts payable | $ |
| Notes payable | $ |
| Second mortgage bonds | $ |
| Debentures | $ |
| Subordinated debentures | $ |
| Total | $ |
What is the effect of adjusting for subordination? If your answer is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest dollar. | Account | Amount Received after subordination adjustment |
| Notes payable | $ |
| Subordinated debentures | $ |
3 $490,000 $290,000 $40,000 No No 1 Liquidation 2 Proceeds from sale of foed assets 4 Proceeds from sale of current assets 5 Trustee's costs 6 Any single worker due more than $2,000 in wages? 7 Any unfunded pension plan liabilities? 8 9 Balance Sheet 10 Current assets $400,000 11 12 13 14 15 Net fixed assets 800,000 16 17 18 19 20 21 Total assets $1,000,000 22 23 Notes 24 *All fixed assets are pledged as collateral to the mortgage bonds. 25 "Subordinated to notes payable only Accounts payable Accrued taxes Accrued wages Notes payable Total current liabilities First-mortgage bonds Second-mortgage bonds Debentures Subordinated debentures Common stock Retained earnings Total claims $50,000 40.000 30,000 180,000 $300,000 300,000 200,000 200.000 100,000 50,000 - 150.000 $1.000.000 26 Distribution to Common Shareholders: Amount distributed to common shareholders Formulas #N/A $490,000 Distribution to Mortgage Bondholders: Proceeds from sale of fixed assets Less: First mortgage (paid from sale of fixed assets) Second mortgage (paid from sale of fixed assets) Total funds distributed to mortgage bondholders #N/A #N/A SO Funds available from fixed assets proceeds after distribution to bondholders $490,000 #N/A Distribution to Priority Claimants: Proceeds from sale of assets after distribution to mortgage bondholders Less: Fees and expenses of bankruptcy Wages due to workers within 3 months of bankruptcy Taxes due to federal, state, and local governments Total funds distributed to priority claimants #N/A #N/A #N/A #N/A Funds available for distribution to general creditors #N/A Pro Rata Distribution Before Subordination Adjustment #N/A Distribution to General Creditors: Pro Rata Distribution Before Subordination Adjustment e of Original Claim Received Total Amount Received Distribution after Subordination Adjustment SO 0 General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims Amount of Claim 50,000 180,000 200.000 100,000 $530,000 0 SO Formulas Amount of Claim #NA Distribution after Subordination Adjustment Total Amount Received #NA General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims Pro Rata Distnbution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A e of Original Claim Received #N/A #N/A #N/A #N/A #N/A #N/A #NA #NA #N/A #NA 3 $490,000 $290,000 $40,000 No No 1 Liquidation 2 Proceeds from sale of foed assets 4 Proceeds from sale of current assets 5 Trustee's costs 6 Any single worker due more than $2,000 in wages? 7 Any unfunded pension plan liabilities? 8 9 Balance Sheet 10 Current assets $400,000 11 12 13 14 15 Net fixed assets 800,000 16 17 18 19 20 21 Total assets $1,000,000 22 23 Notes 24 *All fixed assets are pledged as collateral to the mortgage bonds. 25 "Subordinated to notes payable only Accounts payable Accrued taxes Accrued wages Notes payable Total current liabilities First-mortgage bonds Second-mortgage bonds Debentures Subordinated debentures Common stock Retained earnings Total claims $50,000 40.000 30,000 180,000 $300,000 300,000 200,000 200.000 100,000 50,000 - 150.000 $1.000.000 26 Distribution to Common Shareholders: Amount distributed to common shareholders Formulas #N/A $490,000 Distribution to Mortgage Bondholders: Proceeds from sale of fixed assets Less: First mortgage (paid from sale of fixed assets) Second mortgage (paid from sale of fixed assets) Total funds distributed to mortgage bondholders #N/A #N/A SO Funds available from fixed assets proceeds after distribution to bondholders $490,000 #N/A Distribution to Priority Claimants: Proceeds from sale of assets after distribution to mortgage bondholders Less: Fees and expenses of bankruptcy Wages due to workers within 3 months of bankruptcy Taxes due to federal, state, and local governments Total funds distributed to priority claimants #N/A #N/A #N/A #N/A Funds available for distribution to general creditors #N/A Pro Rata Distribution Before Subordination Adjustment #N/A Distribution to General Creditors: Pro Rata Distribution Before Subordination Adjustment e of Original Claim Received Total Amount Received Distribution after Subordination Adjustment SO 0 General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims Amount of Claim 50,000 180,000 200.000 100,000 $530,000 0 SO Formulas Amount of Claim #NA Distribution after Subordination Adjustment Total Amount Received #NA General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims Pro Rata Distnbution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A e of Original Claim Received #N/A #N/A #N/A #N/A #N/A #N/A #NA #NA #N/A #NA
