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Basu's Beer Co. is in financial distress and is to be liquidated. The book value balance sheet is as follows: Assets 900,000.00 Equity 300,000.00 Bond
Basu's Beer Co. is in financial distress and is to be liquidated. | |||||||||||||
The book value balance sheet is as follows: | |||||||||||||
Assets | 900,000.00 | Equity | 300,000.00 | ||||||||||
Bond 1 | 200,000.00 | ||||||||||||
Bond 2 | 400,000.00 | ||||||||||||
900,000.00 | 900,000.00 | ||||||||||||
In addition you are provided with the following information | |||||||||||||
The liquidating value of all assets is 500,000 | |||||||||||||
50,000 will be used to cover administrative costs of the bankruptcy and other business claims (such as wages due). | |||||||||||||
Bond 1 is secured by assets that can be sold for 100,000. Note that these assets are included in the total assets mentioned above | |||||||||||||
Bonds 1 and 2 have equal priority in terms of seniorty. | |||||||||||||
Question | |||||||||||||
If you follow the bankruptcy liquidation rules strictly, what would be your proposed distribution? | |||||||||||||
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