At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown here (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 Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202 Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 24 Bankruptcy, Reorganization, and Liquidation 957 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 trustees costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. Balance Sheet (Thousands of Dollars) 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 a 300 Second-mortgage bonds a 200 Debentures 200 Subordinated debentures b 100 Common stock 50 Retained earnings (150) Total assets $1,000 Total liabilities & equity $1,000 Notes: a All fixed assets are pledged as collateral to the mortgage bonds. b Subordinated to notes payable only. a. How much will McDaniels shareholders receive from the liquidation? b. How much will the first mortgage bondholders receive from collateralized assets? Will they receive their full claim? If not, how much is their remaining claim? c. How much will the second mortgage bondholders receive from collateralized assets? Will they receive their full claim? If not, how much is their remaining claim? d. Who are the other priority claimants (in addition to the mortgage bondholders)? How much will they receive from the liquidation? e. Who are the remaining general creditors? How much will each receive from the distribution before subordination adjustment? How much will each receive after subordination? How much in total will the second mortgage holders receive (include the amount received from collateral)