Question
Borden Corporation is undergoing a Chapter 7 liquidation. Currently, it has cash of $130,000, inventory of $650,000, and equipment of $775,000. It owes an unsecured
Borden Corporation is undergoing a Chapter 7 liquidation. Currently, it has cash of $130,000, inventory of $650,000, and equipment of $775,000. It owes an unsecured bank loan payable of $500,000 and unsecured accounts payable of $1,600,000. During the current month, the Receiver sells Borden's entire inventory to a liquidator for $290,000. The entire cash balance is then distributed to unsecured creditors.
The receiver's payment to the bank is
A $500,000.
B $420,000.
C $100,000.
D $290,000.
Mannheim Corporation is ready to emerge from Chapter 11 bankruptcy under a reorganization plan accepted by all parties. Mannheim's balance sheet shows:
Various assets $2,000,000 Prepetition liabilities, fully secured $ 400,000
Prepetition liabilities subject to compromise 1,360,000
Postpetition liabilities 820,000
Shareholders' equity (580,000)
TOTAL $2,000,000 TOTAL $2,000,000
A $2,370,000.
B $2,000,000.
C $2,580,000.
D $1,760,000.
New equity interests in the reorganized company are $160,000. The present value of future cash flows from the reorganized company's operating assets is $2,370,000. The compromised amount of Mannheim's prepetition liabilities is
A $1,360,000.
B $1,390,000.
C $2,210,000.
D $ 990,000.
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