Excel Online Structured Activity: Liquidation
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 $420,000, while the current assets were sold for another $270,000. Thus, the total proceeds from the liquidation sale were $690,000. The trustee's costs amounted to $55,000; 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.
Open spreadsheet
- How much will McDaniel's shareholders receive from the liquidation? If your answer is zero, enter "0". Round your answer to the nearest dollar.
$ fill in the blank 2
- How much will the mortgage bondholders receive? If your answer is zero, enter "0". Round your answer to the nearest dollar.
$ fill in the blank 3
- 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 | $ fill in the blank 4 |
| Workers' wages due | $ fill in the blank 5 |
| Governments' taxes due | $ fill in the blank 6 |
| Total | $ fill in the blank 7 |
- 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 | $ fill in the blank 8 |
| Notes payable | $ fill in the blank 9 |
| Second mortgage bonds | $ fill in the blank 10 |
| Debentures | $ fill in the blank 11 |
| Subordinated debentures | $ fill in the blank 12 |
| Total | $ fill in the blank 13 |
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 | $ fill in the blank 14 |
| Subordinated debentures | $ fill in the blank 15 |
C D E F G $420,000 $270,000 $55,000 No No A B 1 Liquidation 2 3 Proceeds from sale of fixed 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 600,000 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. 26 27 Distribution to Common Shareholders: 28 Amount distributed to common shareholders 29 30 Distribution to Mortgage Bondholders: 31 Proceeds from sale of fixed assets 32 Less: 33 First mortgage (paid from sale of fixed assets) 34 Second mortgage (paid from sale of fixed assets) 35 Total funds distributed to mortgage bondholders 36 37 Funds available from fixed assets proceeds after distribution to bondholders 38 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 Formulas #N/A $0 $420,000 300,000 200,000 $500,000 #N/A #N/A -$80,000 #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 Percentage of Original Claim Received Total Amount Received Amount of Claim Distribution after Subordination Adjustment $0 0 General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims 50,000 180,000 0 0 0 0 200,000 100,000 $530,000 0 0 $0 Formulas Distribution after Subordination Adjustment Amount of Claim #N/A Total Amount Received #N/A Pro Rata Distribution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims Percentage of Original Claim Received #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A C D E F G $420,000 $270,000 $55,000 No No A B 1 Liquidation 2 3 Proceeds from sale of fixed 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 600,000 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. 26 27 Distribution to Common Shareholders: 28 Amount distributed to common shareholders 29 30 Distribution to Mortgage Bondholders: 31 Proceeds from sale of fixed assets 32 Less: 33 First mortgage (paid from sale of fixed assets) 34 Second mortgage (paid from sale of fixed assets) 35 Total funds distributed to mortgage bondholders 36 37 Funds available from fixed assets proceeds after distribution to bondholders 38 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 Formulas #N/A $0 $420,000 300,000 200,000 $500,000 #N/A #N/A -$80,000 #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 Percentage of Original Claim Received Total Amount Received Amount of Claim Distribution after Subordination Adjustment $0 0 General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims 50,000 180,000 0 0 0 0 200,000 100,000 $530,000 0 0 $0 Formulas Distribution after Subordination Adjustment Amount of Claim #N/A Total Amount Received #N/A Pro Rata Distribution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A General Creditors' Claims Unsatisfied portion of first mortgage Accounts payable Notes payable (to banks) Second mortgage Debentures Subordinated debentures Total claims Percentage of Original Claim Received #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
